Instant Asset Write-Off
From 1 July 2026, the $20,000 instant asset write-off has been made permanent.
Eligible small businesses with aggregated annual turnover of less than $10 million may be able to immediately deduct the business-use portion of eligible depreciating assets costing less than $20,000.
The threshold applies per asset, meaning multiple eligible assets can qualify in the same income year.
Who can use the write-off?
The instant asset write-off forms part of the small business simplified depreciation rules.
An eligible small business must generally have aggregated annual turnover of less than $10 million and use the simplified depreciation rules.
To qualify for the immediate deduction, an eligible asset must cost less than $20,000 and be first used, or installed ready for use, in the relevant income year.
Only the portion relating to business or other taxable use is deductible.
Both new and second-hand assets can generally qualify, although exclusions and limitations apply to certain assets.
The $20,000 threshold applies to each asset
The threshold applies separately to each eligible asset rather than to total annual expenditure.
This means a business may be able to immediately deduct multiple eligible assets costing less than $20,000 each.
It is important to remember that the instant asset write-off is a tax deduction, not a cash rebate. The benefit will depend on the business’s circumstances, taxable income and business use of the asset.
For businesses considering significant equipment or technology purchases, timing should therefore form part of broader tax planning, rather than being driven by the deduction alone.
What about improvements to existing assets?
Certain costs associated with improving an existing asset may also qualify for an immediate deduction.
This can include the first eligible improvement made to an asset in an income year where the improvement costs less than $20,000 and the original asset previously qualified for the instant asset write-off.
Other improvements may instead need to be allocated to the small business depreciation pool.
Assets costing $20,000 or more
Assets costing $20,000 or more cannot generally be immediately deducted under the instant asset write-off.
Instead, eligible assets can generally be added to the small business depreciation pool and depreciated at:
15% in the first income year
30% in subsequent income years
From 1 July 2026, the low pool value threshold has also increased from $1,000 to $20,000.
Where the adjusted balance of the small business pool falls below the applicable threshold, the remaining balance may generally be deducted.
Re-entering simplified depreciation
There is also a transitional concession for businesses that previously opted out of the simplified depreciation rules.
Eligible businesses may be able to re-enter the regime without being subject to the usual five-year lock-out period.
This concession is available until 30 June 2027.
Timing matters
To claim the instant asset write-off, the asset must generally be first used or installed ready for use in the relevant income year.
Simply ordering or paying for an asset before year end will not necessarily be sufficient if it has not yet been delivered and made ready for use.
The deduction is claimed in the business’s tax return for the relevant income year.
Businesses should also retain appropriate records, including invoices and evidence supporting when the asset was first used or installed ready for use.
A permanent planning consideration for small business
Making the $20,000 threshold permanent provides greater certainty for small businesses considering future asset purchases.
However, the availability of a tax deduction should not be the sole reason for making an investment.
Cash flow, financing, business requirements and the commercial benefit of the asset remain important considerations. Good business accounting and tax planning should consider these factors together.
Contact Us
If you are considering purchasing equipment, vehicles, technology or other business assets and would like to understand the available tax treatment, contact PRATT Partners.
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