Budget Review May 2026: What’s in it for Sole Traders?

Note: This blog post is general in nature and not intended to constitute tax or financial advice. Please speak to a qualified advisor or the ATO for advice related to your own personal circumstances.

Summary of key updates for sole traders

Potential positives for sole traders:

• Permanent $20,000 instant asset write-off

• Fuel excise relief for heavy vehicle operators

• Simplified deductions for mixed-income earners

• Startup support and R&D incentives

• Free access to building standards

• Additional mental health support for business owners

Potential downsides:

• New trust tax rules

• Capital gains tax changes

• Restrictions to negative gearing

• Increased compliance requirements for NDIS providers

Tax relief for individuals and workers

$250 Working Australians Tax Offset (WATO)

The government has introduced the "Working Australians Tax Offset," a $250 annual rebate aimed at 13 million workers.

This will be applied automatically through tax returns, although the full measure is not expected to start until the 2027–28 financial year.

For sole traders, this will mainly apply if you also earn a salary or wages through casual, part-time, or employed work.

$1,000 Instant Tax Deduction

From 1 July 2026, individuals will be able to claim up to $1,000 in work-related expenses without receipts.

The idea is to reduce paperwork and make tax time simpler for workers with smaller claims.

However, according to current Treasury details, this measure will mainly apply to those earning salary and wage income rather than business-only income.

This means that, as with the new $250 tax offset, the sole traders who benefit are mainly those who have another source of income outside their business.

Operational benefits for sole traders and small businesses

$20,000 Instant Asset Write-Off

One of the biggest wins for business owners is that the $20,000 instant asset write-off is becoming permanent.

Eligible businesses with turnover under $10 million will continue to be able to immediately deduct eligible purchases like tools, equipment, technology and work vehicles.

Previously, the write-off was extended year-by-year, making it difficult to plan ahead with confidence.

Making it permanent gives sole traders more certainty when investing in their business.

Fuel Excise Relief

The Budget also includes $2.9 billion in fuel excise relief.

For businesses operating heavy vehicles, the road user charge will be reduced to zero.

This could provide some welcome relief for trades, transport businesses and delivery services dealing with rising fuel and operating costs.

Big changes to trusts, property and wealth building

Some of the largest changes announced in the Budget relate to trusts, capital gains tax and property investing.

These measures are likely to affect business owners using more advanced tax and wealth-building structures.

30% minimum tax on discretionary trusts

From 1 July 2027, discretionary trusts will be subject to a new 30% minimum tax floor.

This effectively limits the ability to distribute income to family members on lower tax rates, a strategy commonly known as “income streaming”.

For business owners using family trusts as part of their tax planning, this could significantly change how those structures are used going forward.

Capital Gains Tax (CGT)

The 50% CGT discount will be replaced by an indexation model from July 2027. This is a major shift for business owners using property or investments to build long-term wealth.

Negative gearing restrictions

Negative gearing will also be restricted to new builds only from July 2027.

For sole traders and small business owners investing in property outside of their business, this could affect future investment decisions.

Impact on NDIS providers and sole traders

The Budget also includes significant changes for NDIS providers, particularly sole traders operating through online platforms.

Mandatory registration and enrolment

The government is moving to close "regulatory gaps" by introducing mandatory registration requirements for various provider tiers:

• Platform Providers (July 1, 2026): Digital platforms (e.g., Mable, Hireup) must now be NDIS-registered. Sole traders using these platforms will face stricter worker screening and mandatory training requirements.

• Expanded Registration (July 2027): Mandatory registration will be extended to include personal care and daily living supports. Sole traders in these categories will no longer be able to operate as unregistered providers.

• Basic Enrolment: A new "basic enrolment" system will be introduced for all providers to increase visibility and prevent fraud within the scheme.

New digital claims system

From July 2026, the NDIA will introduce a new real-time claims system.

Providers will need to submit more detailed digital evidence when claiming payments.

While this may increase admin requirements, the goal is to improve payment speed and reduce fraud across the system.

Supporting new businesses and startups

The Budget also introduced several measures designed to support startups and newer businesses.

Startup loss refund scheme

From July 2028, eligible startup companies with turnover under $10 million will be able to “cash out” tax losses from their first two years of operation.

Instead of carrying losses forward into future years, businesses may receive a refundable tax offset.

This provides an immediate cash injection when a new business needs it most during the initial "burn" phase before becoming profitable.

The refund will be capped based on the PAYG withholding and fringe benefits tax already paid by the business.

Expanded R&D incentives

The refundable Research and Development Tax Incentive will increase from 25% to 50% for eligible businesses under 10 years old with turnover under $50 million.

Thresholds for Venture Capital Limited Partnerships (VCLPs) have been raised, making it easier for young, expanding businesses to attract larger private investment rounds.

Free access to building standards

Small businesses and tradies will now receive free access to Australian standards referenced in legislation.

This could save some businesses up to $1,600 per year in subscription costs.

AI accelerator grants

A new $70 million AI Accelerator fund will provide grants for businesses developing or implementing advanced AI technologies.

Simpler business registration

The government is also introducing a new “tell-us-once” digital ID system designed to simplify the process of registering a business and applying for various licenses.

Mental health support for small business owners

An additional $8 million has been allocated to the NewAccess for Small Business Owners program.

The program provides free mental health coaching and financial wellbeing support specifically for small business owners.

Final thoughts

The 2026 Federal Budget is a "gardening" budget. Treasurer Jim Chalmers has spent his time pruning back the overgrown tax concessions of the past (trusts and property) to make room for new growth in productivity and national resilience.

He has attacked "sacred cows" (like the 50% CGT discount) to fund a more modern, innovation-led economy. It asks the wealthiest to pay for the country's national security and the next generation's productivity.

It will be interesting to see what happens next year when these new policies come into play.

Cover Photo by Microsoft 365 on Unsplash