Instant Asset Write-Off 2025–26: What Australian Small Businesses Must Know

For Australian small business owners, few tax concessions are as immediately impactful as the instant asset write-off. In the 2025–26 financial year, eligible businesses can claim an immediate deduction for depreciating assets costing less than $20,000 — but navigating the eligibility rules, understanding what happens at year-end, and planning for the proposed 2026–27 changes requires careful guidance from a qualified accountant.

Understanding the Instant Asset Write-Off in 2025–26

The instant asset write-off allows eligible small businesses to deduct the full cost of a qualifying asset in the income year it is first used or installed ready for use, rather than depreciating it over several years. For the 2025–26 financial year (1 July 2025 to 30 June 2026), the threshold is $20,000 per asset.

This concession is administered under the ATO's simplified depreciation rules and applies to businesses with an aggregated annual turnover of less than $10 million. There is no cap on the number of assets that can be written off, provided each individual asset falls below the $20,000 threshold.

It is important to understand that the threshold applies per asset, not per invoice or purchase order. A business purchasing five qualifying assets at $18,000 each can write off all five — a total deduction of $90,000 — in the same income year.

Key Eligibility Conditions

To claim the instant asset write-off in 2025–26, your business must satisfy all of the following conditions:

• Turnover threshold — Aggregated annual turnover must be less than $10 million. This includes the turnover of any connected entities or affiliates.
• Simplified depreciation election — The business must be using the ATO's simplified depreciation rules for the income year.
• Asset cost threshold — Each individual asset must cost less than $20,000. If registered for GST, the threshold is GST-exclusive; if not registered, it is GST-inclusive.
• Ready for use by 30 June 2026 — The asset must be first used or installed ready for use before 30 June 2026. Ordering or paying for an asset before the deadline is not sufficient if it is not yet operational.
• Business use — The asset must be used for business purposes. If there is mixed personal and business use, only the business-use proportion is deductible.

What Assets Qualify — and What Does Not

Most tangible depreciating assets used in a business qualify, including equipment, tools, machinery, computers, and certain vehicles. However, there are important exclusions and nuances that a qualified accountant can help you navigate.

Passenger Vehicles

Passenger vehicles — defined as motor vehicles designed to carry fewer than nine passengers and a load of less than one tonne — are subject to a separate car cost limit of $69,674 for 2025–26. Because this limit exceeds the $20,000 write-off threshold, passenger vehicles cannot be instantly written off and must instead be placed into the small business depreciation pool.

However, commercial vehicles such as one-tonne utes or vans that fall outside the ATO's definition of a "car" may qualify for the instant write-off if their cost is below $20,000. Your accountant can confirm the correct classification for your specific vehicle.

Assets Costing $20,000 or More

Assets that cost $20,000 or more cannot be instantly written off. They must be allocated to the small business general depreciation pool, where they are depreciated at 15% in the first year and 30% in subsequent years using the diminishing value method.

Intangible Assets and Excluded Items

Certain assets are excluded from the simplified depreciation rules entirely, including horticultural plants, capital works (such as building construction), and assets leased to other parties on a depreciating asset lease. Your accountant can identify which assets in your business fall outside the concession's scope.

The Proposed 2026–27 Change: A Permanent $20,000 Threshold

In the 2026–27 Federal Budget delivered on 12 May 2026, the Australian Government announced a proposal to make the $20,000 instant asset write-off threshold permanent from 1 July 2026. This would remove the uncertainty that has surrounded the concession for several years, during which the threshold and eligibility have been subject to annual legislative renewal.

However, as of the date of this article, this measure has not yet been enacted into law. If the legislation does not pass Parliament, the threshold is scheduled to revert to the default of $1,000 — a significant reduction that would affect the depreciation treatment of most business asset purchases.

Businesses should plan based on currently enacted law while remaining alert to legislative developments. A registered tax agent or accountant can monitor these changes and advise you on the optimal timing for asset purchases.

Common Mistakes to Avoid

The instant asset write-off is straightforward in principle but frequently misapplied in practice. The following are the most common errors that accountants encounter:

• Claiming assets not yet in use — The asset must be installed and ready for use by 30 June 2026, not merely ordered or paid for. Businesses that purchase assets in June but do not receive or install them until July cannot claim the write-off in the 2025–26 year.
• Ignoring the aggregated turnover test — Businesses that are part of a group of related entities must aggregate the turnover of all connected entities. A business with $8 million in its own turnover may be ineligible if a connected entity adds another $3 million.
• Applying the threshold to the total invoice — The $20,000 threshold applies per asset, not per invoice. Purchasing multiple assets on a single invoice does not allow you to aggregate their costs against the threshold.
• Forgetting to elect simplified depreciation — The instant asset write-off is only available to businesses using the simplified depreciation rules. Businesses using the general depreciation rules cannot access this concession.
• Overclaiming on mixed-use assets — If an asset is used for both business and personal purposes, only the business-use percentage is deductible. Claiming 100% on a mixed-use asset is a common ATO audit trigger.

Australian Regulatory Context

The instant asset write-off is legislated under the Income Tax Assessment Act 1997 (ITAA 1997), specifically within the simplified depreciation rules in Subdivision 328-D. The ATO administers the concession and publishes detailed guidance on its website, including worked examples and eligibility checklists.

The ATO has indicated that it actively monitors claims under the instant asset write-off as part of its small business compliance program. Common audit triggers include large write-off claims relative to business size, claims for assets with significant personal use, and claims for assets that do not appear to be used in the business's ordinary operations.

The Tax Practitioners Board (TPB) regulates the tax agents and BAS agents who assist businesses with their depreciation claims. Engaging a TPB-registered tax agent or accountant ensures that your claims are prepared by a qualified professional who is bound by the Code of Professional Conduct.

Questions to Ask Your Accountant

Before making asset purchase decisions based on the instant asset write-off, consider asking your accountant the following questions:

• Does my business meet the aggregated turnover threshold, including all connected entities?
• Is my business currently using the simplified depreciation rules, or do I need to elect into them?
• Will the asset be installed and ready for use before 30 June 2026?
• Does the asset fall within the ATO's definition of a "car," and if so, does the car cost limit apply?
• What is the business-use percentage of this asset, and how should I document it?
• How does the proposed permanent $20,000 threshold affect my asset purchase timing decisions for 2026–27?
• Are there any assets I am planning to purchase that should be pooled rather than written off?

How MyMoney® Can Help

Maximising your instant asset write-off entitlements requires more than simply knowing the threshold — it requires a qualified accountant who understands your business structure, turnover, and asset mix, and who can advise on the optimal timing and treatment of each purchase.

MyMoney® connects Australian small businesses with experienced, TPB-registered accountants who specialise in small business tax planning and ATO compliance. Whether you need help with your 2025–26 tax return, want to plan your asset purchases for 2026–27, or need clarity on the proposed legislative changes, our network of professionals is ready to assist.

Post a Brief to describe your accounting needs and receive competitive proposals from qualified accountants. Or Browse Accountants on the MyMoney® Marketplace to find a specialist who understands the instant asset write-off rules and can help your business make the most of every available concession.