Instant Asset Write-Off Australia: The $20,000 Threshold Explained

The instant asset write-off allows an eligible small business to deduct the full cost of a business asset in the year it is first used, rather than depreciating it over several years. The threshold is $20,000 per asset for a business with an aggregated turnover under $10 million. This is settled law for the 2025-26 income year, and on 19 August 2026, Parliament passed legislation making the $20,000 threshold permanent from 1 July 2026 onward.

This guide covers who qualifies, which assets count, what changes from 1 July 2026, and the trap that catches people who assume every business purchase is covered.

What is the instant asset write-off?

Most business equipment is a depreciating asset, meaning its cost is normally claimed gradually over its effective life. The instant asset write-off is an exception: instead of spreading the deduction over several years, an eligible business can claim the entire business-use cost of a qualifying asset in the income year it is first used or installed ready for use.

This is a deduction, not a rebate. A $10,000 tool purchase written off instantly reduces taxable income by $10,000; it does not hand back $10,000 in cash. At a 25% company tax rate, the actual cash benefit on that purchase is $2,500, with the rest still funded by the business.

If your annualised turnover totals more than $500 million, you will not be permitted to employ the instant asset write-off method on any assets that you own. You cannot take advantage of the instant write-off of an asset if temporary full expensing is allowed for the asset.

Is the $20,000 threshold still available from 1 July 2026?

Yes, and this is worth stating plainly because a lot of content published earlier in 2026 says otherwise. The $20,000 threshold for 2025-26 was locked in by the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025. Separately, the government announced in the May 2026 Budget that it would make $20,000 the permanent threshold from 1 July 2026, rather than something Treasury has to re-legislate every year or two. That measure, the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, passed both houses of Parliament on 19 August 2026 and has since received Royal Assent. Without it, the threshold would have reverted to $1,000 on 1 July 2026.

Who is eligible

An asset qualifies for the instant write-off where all of the following apply:

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  Your aggregated turnover, meaning your business plus any affiliated or connected entities, is under $10 million.
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  You elect to use the simplified depreciation rules for the income year. Opting out of simplified depreciation forfeits the instant write-off entirely.
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  The asset is first used, or installed ready for use, for a taxable business purpose within the income year. Ordering or paying for an asset does not count on its own.
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  The cost of the asset is less than $20,000. If you are registered for GST, this is the GST-exclusive cost. If you are not registered for GST, the GST-inclusive cost is what counts against the threshold.

Both new and second-hand assets qualify, and where an asset is used partly for private purposes, only the business-use proportion is deductible. Our guide to small business tax deductions in Australia covers apportionment in more detail.

The per-asset threshold, and the car-limit trap

The $20,000 limit applies per asset, not as a yearly total, so a business can write off several separate purchases in the same year as long as each one is individually under the threshold. A tradie buying a $4,500 generator, a $12,000 ute tray fit-out and a $3,000 set of tools could potentially claim all three in full in the same income year. Our accountant for tradies in Adelaide service exists largely because these purchase patterns are so common in trade businesses.

Passenger vehicles designed to carry fewer than nine passengers and under one tonne are the exception that catches people out. These are capped at the ATO's car limit, roughly $69,674 for the 2025-26 income year, regardless of the instant asset write-off threshold. A $75,000 SUV does not become a $20,000 write-off simply because $20,000 is the headline figure elsewhere on this page; the car limit applies first, and the excess is never deductible even over time.

What happens to assets of $20,000 or more

Assets that cost $20,000 or more do not miss out entirely, they move into the small business simplified depreciation pool instead and are depreciated at:

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  15% in the first income year, regardless of when in the year the asset was added to the pool
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  30% of the pool balance in each income year after that

Pool balances under $20,000 at the end of an income year can also be written off in full. The rules that normally lock a business out of re-entering simplified depreciation for 5 years after opting out remain suspended until 30 June 2027, so businesses that stepped away from simplified depreciation in the past are not penalised for returning to this measure.

What is excluded

Not every business purchase qualifies. Common exclusions and special cases include:

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  Buildings and other capital works, which follow separate capital works deduction rules, not this measure.
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  Horticultural plants, including grapevines and fruit trees, which depreciate under their own specific rules.
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  Assets allocated to a software development pool, and assets leased out to another party on a depreciating asset lease, which are generally excluded from simplified depreciation.
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  The private-use portion of any asset, which is never deductible under this or any other depreciation measure.

How to claim it

The instant asset write-off is claimed through the simplified depreciation rules when your small business tax return is prepared and lodged, whether you operate as a sole trader, through a company tax return, or as a sole trader. It is not a separate application or rebate claim, there is nothing to register in advance, and the deduction is simply included in the year's return for eligible purchases.

If you are weighing up asset purchases against other 2026-27 measures, our guide to the small business energy incentive and the wider Federal Budget 2026 tax changes set out what else is available alongside this measure.