Adjusted EBITDA in 2026: A Clearer View for Australian Businesses

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortisation. It’s a widely used metric that strips out certain expenses to focus on a business’s core operating results. However, EBITDA alone can sometimes give a distorted view, especially when unusual or non-recurring items are involved.

Adjusted EBITDA refines this further. It removes not only the standard non-operating expenses, but also irregular or one-off items—such as asset write-downs, restructuring costs, or government grants. The goal is to show a company’s true underlying earnings from its regular business activities.

In 2026, Adjusted EBITDA is increasingly used in Australia for:

• Loan applications and finance assessments
• Mergers and acquisitions (M&A)
• Investor presentations and reporting
• Performance benchmarking

Calculating Adjusted EBITDA starts with the standard EBITDA formula, then makes further adjustments to account for items that don’t reflect the ongoing operations of the business.

Step-by-Step Calculation

1. Start with Net Profit: Begin with your business’s net profit after tax.
2. Add Back:
   • Interest expenses
   • Taxes
   • Depreciation
   • Amortisation
3. Adjust For:
   • Non-recurring expenses (e.g., restructuring costs, legal settlements)
   • Non-cash items (e.g., asset write-downs)
   • One-off income or grants (e.g., government support payments)
   • Gains or losses from asset sales
   • Changes in accounting standards that affect reported earnings

The specific adjustments will depend on your business and the nature of its operations. The key is to be consistent and transparent about what is included or excluded.

Example Calculation

Suppose an Australian business reports the following for the 2024–25 financial year:

• Net profit: $1.7 million
• Interest: $200,000
• Taxes: $300,000
• Depreciation: $100,000
• Amortisation: $50,000

EBITDA:

$1.7 million + $200,000 + $300,000 + $100,000 + $50,000 = $2.35 million

Now, suppose the business had a $120,000 one-off government grant and a $180,000 non-recurring machinery upgrade expense.

Adjusted EBITDA:

$2.35 million - $120,000 (grant) - $180,000 (upgrade expense) = $2.05 million

This adjusted figure gives a clearer sense of the business’s ongoing earning power.

Australian businesses are facing a dynamic environment in 2026, with shifting economic conditions and evolving reporting standards. Adjusted EBITDA has become a key metric for several reasons:

1. Revealing True Operating Performance

By removing irregular and non-operating items, Adjusted EBITDA helps business owners and stakeholders see the underlying profitability of the business. This is crucial for making informed decisions about growth, investment, and risk.

2. Supporting Finance and Investment Decisions

Lenders and investors often look to Adjusted EBITDA when assessing a business’s ability to service debt or generate returns. It provides a more reliable basis for valuation and risk assessment than net profit alone.

3. Enabling Fair Comparisons

With many businesses affected by unique events or accounting changes in recent years, Adjusted EBITDA allows for more meaningful comparisons across companies and industries. It helps level the playing field when benchmarking performance.

4. Informing Incentives and Performance Targets

Some Australian companies are tying executive bonuses and employee incentives to Adjusted EBITDA targets. This aligns rewards with the business’s true operational results, rather than figures that might be inflated or distorted by one-off events.

The adjustments made to EBITDA can vary, but some of the most common in Australia include:

• Restructuring costs: Expenses related to significant changes in the business structure
• Legal settlements: One-off legal costs that are not part of normal operations
• Government grants: Income from government support programs
• Asset write-downs: Non-cash expenses from reducing the value of assets
• Gains or losses from asset sales: Profits or losses from selling business assets
• Changes in accounting standards: Adjustments due to updates in financial reporting rules

It’s important to document and explain each adjustment clearly, especially when presenting results to external parties.

Adjusted EBITDA is now a regular feature in Australian boardrooms and finance discussions. Here’s how it’s being used:

Loan Applications and Banking

Major banks and lenders often request Adjusted EBITDA figures when assessing business finance applications. This helps them get a clearer view of the business’s ability to meet its obligations and manage risk.

Mergers and Acquisitions

In M&A transactions, Adjusted EBITDA is frequently used as a basis for valuing businesses. Buyers and sellers negotiate based on multiples of Adjusted EBITDA, as it reflects the sustainable earnings potential of the business.

Investor Relations and Reporting

ASX-listed companies and private businesses alike are including Adjusted EBITDA in their investor communications. Detailed breakdowns and footnotes explaining each adjustment are becoming standard practice, helping build trust and transparency with stakeholders.

Benchmarking and Growth Planning

Business owners use Adjusted EBITDA to track genuine growth over time and compare performance with peers. This is especially useful in sectors where one-off events or accounting changes can distort traditional profit measures.

While Adjusted EBITDA can provide valuable insights, it’s important to use it responsibly. Overly aggressive or inconsistent adjustments can make results look better than they are, which can undermine trust with lenders, investors, and regulators.

Australian authorities and market operators have highlighted the need for clear, consistent reporting of Adjusted EBITDA. Businesses should:

• Clearly document all adjustments
• Apply the same approach from year to year
• Avoid excluding items that are part of regular business operations

If you’re considering using Adjusted EBITDA in your business, keep these points in mind:

• Be transparent: Clearly explain all adjustments in your financial reports and presentations.
• Stay consistent: Use the same criteria for adjustments each year to allow for meaningful comparisons.
• Focus on relevance: Only adjust for items that truly distort the picture of ongoing operations.
• Engage your advisors: Work with your accountant or finance team to ensure your calculations are robust and defensible.

Adjusted EBITDA is a valuable tool for Australian businesses in 2026, offering a clearer view of true financial performance. By focusing on ongoing earnings and removing the impact of irregular items, it supports better decision-making, fairer valuations, and more effective communication with stakeholders.

Used wisely and transparently, Adjusted EBITDA can help your business stand out in a competitive market—whether you’re seeking finance, planning growth, or simply aiming for a more accurate understanding of your results.

For more on business finance and performance measures, visit our finance section.