Last Tuesday night, the government released Budget 2026/27 – and it is a doozy. Treasurer Jim Chalmers introduced it by saying it’s “the most significant tax reform package in more than a quarter of a century”, and there might actually be some truth to that.
For sole traders, there’s plenty in the budget worth paying attention to – from ongoing tax cuts, to new flexibility around PAYG instalments, there’s genuine relief on the table.
But there are also a few places where this budget missed the chance to really back sole traders. Two measures in particular support incorporated companies and/or employees, while quietly excluding sole traders from these much-needed benefits.
So, without further ado, here it is: What’s in the budget for sole traders, and what, unfortunately, isn’t.
What’s in the budget for sole traders: Tax policy
Permanent $20,000 instant asset write-off
The instant asset write-off threshold – where assets worth less than the threshold can be claimed in full, rather than depreciated – has now been permanently set at $20,000.
It was raised to $20k for FY 2023/24 as a cost-of-living measure. Since then, it’s been treated as temporary, with the government needing to extend the policy in their budget each year.
Having it permanently set at $20k means more stability and clarity — sole traders can plan big purchases without having to worry that the threshold will suddenly drop.
💡 Hnry automatically applies the instant asset write-off rules to your assets where applicable – and we include it in your tax calculations and pass on the tax savings in real time! Learn more.
$1,000 instant tax deduction
From FY 2026/27 onwards, you’ll be able to claim a flat $1,000 deduction on your tax return without needing to keep receipts. It’s an incredible win in terms of simplifying tax admin – but it will benefit some sole traders more than others.
For those who don’t rack up huge business expenses, this measure means less admin, no receipt-hoarding, and a straightforward reduction to your taxable income.
But if you have significant work-related costs, this one’s probably a non-event. For those claiming more than $1,000 in work-related deductions, there’s no change in processes.
Monthly PAYG instalment opt-in
Another big change – although it does have a long runway.
From 1 July 2027, sole traders will be able to opt in to monthly PAYG instalments, instead of being locked into the current quarterly model. The calculations will be powered by ATO-approved accounting software, which means your instalments can better reflect how your business is actually tracking – rather than being based on last year’s numbers.
💡 If you’re a Hnry customer, you can sit this one out. We sort your taxes as you go, instead of waiting for the quarter (or even the month!) to be over.
$250 Working Australians Tax Offset
From FY 2027/28 onwards, a new permanent tax offset of up to $250 a year will apply to around 13 million working Australians, specifically including sole traders (a nice bit of recognition!).
In practical terms, the effect of the offset is equivalent to raising the tax-free threshold by nearly $1,800 to $19,985 (or up to $24,985 if you’re eligible for the Low Income Tax Offset). It’ll be applied automatically when you lodge your tax return – no extra paperwork required.
The only downside is that it doesn’t kick in until the 2027/28 financial year, even though cost-of-living pressures are a current issue.
LISTO expansion
As previously announced, from the 2027/28 financial year, the Low Income Super Tax Offset (LISTO) will be expanded. The eligibility threshold rises from $37,000 to $45,000, and the maximum offset increases from $500 to $810.
Continuation of legislated tax cuts
As per Budget 2025/26, the tax rate for income between $18,201 and $45,000 will drop to 15% for FY 2026/27.
A further cut to 14% is set to go live for FY 2027/28.
Small business CGT concessions preserved
A small but important win: The small business capital gains tax (CGT) concessions are staying exactly as they are.
That includes the 15-year exemption, active asset reduction, retirement exemption, and rollover relief – all of which can significantly reduce (or even eliminate) the CGT you’d otherwise pay when selling your business or business assets.
Importantly, the rest of the CGT regime is getting a major overhaul (more on that in a bit), and sole traders sit right in the firing line for some of those changes. So having the small business concessions left untouched is a genuine relief – particularly for sole traders eyeing an eventual sale or retirement.
CGT 50% discount replacement
This one’s slightly tough to swallow.
From 1 July 2027, the current 50% capital gains tax (CGT) discount will be replaced with a new system: CPI-based cost base indexation (which adjusts your asset’s cost for inflation) plus a minimum 30% tax on real gains. The change applies to individuals, partnerships, and trusts.
For sole traders, this matters most if you hold investment assets outside super – think shares, ETFs, or investment properties. Many sole traders rely on these as a retirement vehicle (since they sit outside the employer-super system), so it’s worth understanding how the new rules will affect your long-term planning.
Worth noting that the small business CGT concessions and the main residence exemption are both preserved – so business sales and your home aren’t affected.
Negative gearing restriction
From 1 July 2027, negative gearing on established residential properties will be restricted to new builds only.
(Negative gearing is when your investment property costs you more to run than it earns in rent, with the loss deductible against your other income to reduce your tax bill.)
Existing holdings are grandfathered — so if you owned or contracted to purchase an investment property before 7:30pm AEST on 12 May 2026, your current arrangements stay in place. For properties purchased after that cut-off, from 1 July 2027 onwards you’ll only be able to deduct rental losses against other residential property income (including capital gains on sale), with any excess losses carried forward, rather than offset against your sole trader income or other earnings.
If you were considering purchasing investment property, maybe even to help shore up your retirement, it’s worth taking this into account.
Medicare levy low-income thresholds up 2.9%
The Medicare levy low-income thresholds are getting a 2.9% bump, backdated to 1 July 2025.
In practical terms, this means lower-income sole traders will either continue to be exempt from the Medicare levy, or pay less of it than they otherwise would have. Over a million Australians are expected to benefit.
It’s not a huge change, but every little bit helps.
What’s in the budget for sole traders: Other measures
Increased housing infrastructure spend ($2bn)
The government has committed an additional $2 billion to infrastructure for housing developments around the country, including water and sewerage pipes. The aim is to help deliver an estimated 65,000 new homes over the next decade.
For tradies, that’s a meaningful pipeline of work entering the system. More homes being built means more jobs to bid on, more sites to service, and more opportunities over the long term.
It’s not a direct sole trader measure, but if your work touches the construction industry, it’s worth knowing about.
Mental health and financial wellbeing support extended
The government has committed an additional $8 million from 1 July 2026 to extend two key programs: NewAccess for Small Business Owners (free mental health coaching specifically designed for small business owners) and the Small Business Debt Helpline (free, confidential financial counselling).
Tough times can be especially hard on sole traders, who often manage business pressures on their own. Both these programs are there if you need them – no judgement, no cost, just support when and where you need it.
Fuel excise relief ending
This one unfortunately isn’t good news.
Earlier this year, the government temporarily halved the fuel excise (the tax built into the price of petrol and diesel) and dropped the heavy vehicle road user charge to zero for three months, as a short-term response to global fuel pressures.
That relief is now ending in July, with no new measures in this budget to replace it. So if you regularly use a vehicle for work, you’ll likely feel the difference at the pump.
Where sole traders missed out
Payday Super
This one’s a big deal – and a big miss for sole traders.
As previously legislated, from 1 July 2026, employers will be required to pay their employees’ super at the same time as wages, instead of quarterly. Employees’ super contributions will have far more time to compound, netting greater returns over their working life.
It’s genuinely great news – for employees. But it does nothing for the 1.7 million Australian sole traders who don’t receive a wage. And it’s yet another example of how recent Superannuation reforms just aren’t taking sole traders into account.
In recent years, the Superannuation Guarantee was extended to a large contingent of sole trader contractors, under the Closing Loopholes Act. But guidance around these new obligations is so opaque that many contractors don’t realise they’re owed super, and many businesses aren’t aware they need to pay it.
Compounding the problem, the Small Business Superannuation Clearing House – the free, simple rail that businesses have used to pay super – is set to close on 30 June 2026. Payroll software wasn’t built to pay super to contractors you don’t withhold tax from, and the alternatives are messy. The predictable outcome: Some businesses will misclassify contractors, some will subscribe to payroll software they don’t need, and some will quietly stop paying altogether. These are bad outcomes for all involved.
Sole traders are already less likely to voluntarily contribute to their super fund due to the manual effort involved and the high cost of living. Now with Payday Super, they’re about to be left even further behind.
Loss carry-back (companies only)
From the 2026/27 financial year, companies with aggregated annual turnover under $1 billion will be able to “carry back” a tax loss – meaning they can use a revenue loss in the current year to claim a refund against tax they paid in the previous two income years. Around 85,000 companies are expected to benefit.
This policy is meant to help businesses weather difficult economic periods – but it excludes the most vulnerable business cohort by design. The measure works by reducing company tax (which sole traders don’t pay), and the amount companies can claim back is limited by the size of their franking account balance.
(A franking account balance is a pool of tax credits generated from company tax already paid, which companies can attach to dividends paid to shareholders.)
Sole traders pay personal income tax, not company tax, and don’t have franking accounts. But it’s not just sole traders who are excluded – the majority of the small business base is unincorporated, meaning this benefit can’t apply to them.
This could have been a game changer for sole traders and other small businesses, who are most exposed to economic volatility. But they’ve been completely shut out – again.
About Hnry
Hnry is an award-winning app and tax service designed to help sole traders with their financial admin.
For just 1% +GST of your self-employed income, capped at $1,500 +GST a year, Hnry will calculate and pay all your taxes, levies and whatnot for you, including:
We also complete and lodge your tax return for you, including claiming any tax relief you might be entitled to. It’s all part of the service!
More importantly, we free up thousands of hours for sole traders to focus more on what they do best – their jobs. Hnry is on a mission to make being a sole trader simple, affordable, and accessible for anyone.