Budget preview: A permanent tax break for assets, new housing infrastructure funding, and AI‑driven approvals have all been unveiled as key features of the federal budget.
Federal Treasurer Jim Chalmers has confirmed that the instant asset write‑off (IAWO) will be made a permanent feature of the tax system, locking in a $20,000 threshold for small businesses as part of a wider productivity push in Tuesday’s federal budget.
Under the plan, businesses with annual turnover below $10 million will be able to continue immediately deducting the full cost of eligible depreciating assets costing less than $20,000, rather than seeing the cap fall back to $1,000 from 1 July as previously scheduled (which has required government to re-legislate the extension each year).
The $20,000 limit will apply on a per‑asset basis, meaning multiple purchases of equipment, vehicles, tools, or technology – including new and second‑hand items – can each be claimed in full at the end of the financial year.
In outlining the changes ahead of Tuesday’s budget, Treasurer Chalmers said the measure was designed to cut compliance costs and underpin investment by smaller firms.
“We’ll save small businesses thousands of dollars by making the instant asset permanent in the Budget on Tuesday,” Chalmers said.
“This means small businesses will be able to immediately deduct every piece of new equipment worth up to $20,000, from new tech to tools to machinery.”
A key part of the pitch was the claim that simpler depreciation rules would reduce time spent dealing with the tax system.
“This will help save small businesses 376,000 hours a year in compliance, cutting red tape and getting costs down in our economy,” Chalmers said.
The announcement comes after consecutive short‑term extensions of the scheme, which have shaped asset‑purchase decisions since the pandemic.
$2bn fund to unlock 65k homes
Alongside the IAWO changes, the government has unveiled a $2 billion Local Infrastructure Fund aimed at supporting the construction of 65,000 new homes over the next decade – by paying for enabling works such as roads, water, sewerage, and power connections.
The four‑year package will direct money to local governments and state utility providers, with $500 million reserved for regional projects.
Positioning the package within the government’s wider housing agenda, Chalmers said the budget would channel substantial funds into supply‑side measures to help more Australians into ownership.
“In this Budget, we’re investing billions of dollars to build more homes for Australians,” Chalmers said.
“Right now, it’s too hard for too many Australians to get into their own home and get ahead and that’s why we’re investing in supply.”
Chalmers also sought to characterise the housing plan as aligning social objectives with private capital.
“Our housing plan is pro‑aspiration and it’s pro‑investment,” he said, adding that the government was “coming at this housing challenge from every responsible angle, and boosting supply is central to that”.
Housing Minister Clare O’Neil stressed that the new fund would target the often unseen works that determined whether projects could proceed.
Describing the program, O’Neil said the announcement was for “boring but essential” work to get more homes built.
“This critical investment will literally lay the foundations for our country to build more homes because more housing supply means more housing affordability,” she said.
The budget will also include a $105.9 million commitment over four years to develop an artificial intelligence tool to streamline environmental assessments for housing, energy and critical‑minerals projects.
The system is expected to guide project proponents through federal environmental requirements and provide easier access to relevant data, with the aim of reducing delays, which have been identified as a major bottleneck in the construction pipeline.
Other budget initiatives that have already been leaked include the government’s move towards “dynamic monthly tax instalments”, a shift that is intended to better align tax payments with real‑time business performance.
Chalmers framed the small‑business measures as part of a wider effort to lift national output, ease cost pressures over time, and bolster flailing productivity.
He linked the productivity agenda to the broader macro-economic task of sustaining growth, while living‑cost pressures and rates remain elevated.
“A big productivity push is one of the most important parts of Tuesday’s budget to grow our economy and lift living standards,” he said.
The budget is also set to feature an expansive shake-up of investment property taxes, which are believed to include the 50 per cent capital gains discount being replaced with inflation indexation and negative gearing being restricted to new builds only.
The reforms, which are aimed at addressing intergenerational inequality, have drawn mixed reactions with policy think tanks calling for major changes to the current system, while industry bodies like the Finance Brokers Association of Australia have said that the changes would push up rental prices and lock younger Australians out of the housing market.
[Related: Instant asset write-off officially extended until June 2026]
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