Every year around this time, small business owners start asking the same question: should I buy that piece of equipment before 30 June? The instant asset write-off is usually the reason. It is a genuinely useful concession, but it is also one of the most misunderstood — the threshold has changed repeatedly, the rules apply in ways that surprise people, and the tax saving is often smaller than the sales pitch suggests. Here is how it actually works.
What the instant asset write-off actually does
Normally, when a business buys equipment — a vehicle, machinery, a computer, office furniture — it cannot deduct the whole cost in the year of purchase. Instead, the cost is depreciated: spread across the asset’s effective life, often five to ten years.
The instant asset write-off lets an eligible small business skip that and deduct the full business portion of the cost immediately, in the year the asset is first used or installed ready for use. It is important to understand this is a timing benefit: you claim the same deduction sooner, not a bigger deduction overall. Sooner is still valuable — it improves cash flow in the year you spent the money — but it is not free equipment.
The threshold, year by year — check before you buy
The threshold has bounced around for a decade, and extensions have often been legislated at the last minute. Here is where things stand:
| Income year | Threshold (per asset) | Status |
|---|---|---|
| FY2024–25 (ended 30 June 2025) | Less than $20,000 | Legislated |
| FY2025–26 (ends 30 June 2026) | Less than $20,000 | Legislated |
| FY2026–27 (from 1 July 2026) | $20,000 announced as permanent | Announced, not yet law at time of writing |
For assets first used or installed ready for use between 1 July 2025 and 30 June 2026, the $20,000 threshold is law. The Government has announced it intends to make the $20,000 threshold permanent from 1 July 2026 — which would end the annual guessing game — but until that legislation passes, the default threshold from 1 July 2026 falls back to $1,000. If a purchase decision hinges on the write-off, confirm the current status on the ATO website or ask us first, especially for anything landing after 30 June.
Who can use it
To claim the instant asset write-off, you need to tick all of these boxes:
- You are a small business entity — carrying on a business with aggregated annual turnover under $10 million. “Aggregated” means the turnover of connected and affiliated entities counts too.
- You are using the simplified depreciation rules for that year (the write-off is part of that system, not a stand-alone choice).
- The asset costs less than the threshold and is first used, or installed ready for use, for a taxable purpose in that income year. New and second-hand assets both qualify.
How the $20,000 limit works in practice
Three details in the fine print do most of the damage:
- It applies per asset, and the asset must cost less than $20,000 — not “up to”. A $19,990 machine qualifies; a $20,000 machine does not. But because the limit is per asset, you can write off several assets in the same year: an $8,000 mower, a $14,000 trailer and a $4,500 laptop are each immediately deductible even though together they exceed $20,000.
- GST changes the maths. If you are registered for GST and can claim the GST credit on the purchase, the threshold is tested against the GST-exclusive cost — so an asset priced at $21,500 including GST (about $19,545 excluding GST) can still qualify. If you are not registered for GST, the GST-inclusive price is your cost.
- The whole cost is tested, but only the business portion is deductible. An $18,000 vehicle used 60 per cent for business passes the threshold test on the full $18,000, but your deduction is $10,800.
Assets costing $20,000 or more are not lost — they go into the small business pool and are depreciated at 15 per cent in the first year and 30 per cent each year after that.
The car trap
Vehicles cause more instant asset write-off confusion than anything else. Two separate rules apply. First, most passenger cars simply cost more than $20,000, so they miss the write-off entirely and are depreciated through the pool instead. Second, cars have their own depreciation cost limit — $69,674 for FY2025–26 — so anything you pay above that figure can never be depreciated at all. The car limit applies to vehicles designed to carry fewer than nine passengers and a load under one tonne; many genuine work utes and vans fall outside that definition, but the payload specifications matter, so check before assuming.
Timing: installed ready for use by 30 June
Ordering or paying for an asset before 30 June is not enough. To claim the deduction in FY2025–26, the asset must be first used, or installed ready for use, by 30 June 2026. A machine sitting on a ship, or delivered but not yet assembled and able to be used, belongs to next year’s return. With delivery lead times still unpredictable for some equipment, do not leave June purchases to the last week.
Get the timing and the numbers right
The write-off rewards planning: whether to buy before or after 30 June, whether an asset should be written off or pooled, and how the deduction interacts with your expected profit all change the outcome. As registered tax agents we work through this with clients every autumn as part of pre-30 June tax planning, and we can confirm your eligibility, aggregated turnover and the current state of the legislation before you commit to a purchase. Get in touch and we will run the numbers with you.