What is the instant asset write-off?

The instant asset write-off is a tax incentive from the Australian government that lets small businesses claim an immediate tax deduction for certain assets. Instead of claiming depreciation over several years, you can immediately write off the full cost on your tax return.

It’s a tax break to encourage spending and support small businesses. The small business instant asset write-off lowers your taxable income, which means real tax savings at your marginal tax rate.

How does instant asset write-off work?

It lets businesses instantly deduct the entire cost of an eligible depreciating asset in the income year when it’s first used or installed ready for use.

By allowing businesses to take an immediate deduction, there’s no need for the slower process of claiming the decline in value over the asset’s effective life.

For 2025–26, businesses with an aggregated turnover of less than $10 million can claim the instant asset write-off for eligible depreciating assets costing less than $20,000 each.

Assets costing $20,000 or more can’t be immediately written off. Instead, you place their business portion into the small business pool, which are depreciated at 15% in the first income year and 30% after.

Hot tip: The asset must be first used or installed ready for use for a taxable purpose between 1 July 2025 and 30 June 2026.

What eligible assets can you claim?

Eligible assets include:

• Tools, trade equipment and plant machinery.
• Computers, laptops and IT equipment.
• Office furniture, such as desks, chairs, and shelving.
• Vehicles including vans, utes and cars (subject to the car limit).
• Kitchen equipment, such as coffee machines, for business premises.
• Digital products and software used in business operations.

Some assets don’t qualify. You can’t claim assets on a depreciating asset lease, horticultural plants, or capital works.

Always check the ATO’s assets and exclusions page before making a purchase.

Who can use the instant asset write-off?

Any small business that meets the eligibility criteria can claim the instant asset write-off – sole traders, partnerships, companies and trusts across all industries can access the scheme.

You must have an aggregated annual turnover of less than $10 million and apply the simplified depreciation rules for the relevant financial year. If your business qualifies, you can claim for both new and second-hand assets.

The asset must first be used or installed and ready for use for a taxable purpose during the income year. You can’t stockpile purchases.

The asset must be operational by 30 June to be claimed on that year’s tax return.

How much is the instant asset write-off?

The current threshold for the $20,000 instant asset write-off is $20,000 per asset. This is a temporary measure – on 1 July 2026, the threshold returns to $1,000 unless it’s extended again.

The total cost of the asset has to be under $20,000. If your business is registered for GST, this is the GST-exclusive price. If you’re not registered, the price is GST-inclusive.

For passenger vehicles, the car limit applies, which is currently $69,674. Even if a motor vehicle costs more, you can only use the car limit amount as the depreciating asset cost for tax purposes.

What if you use an asset for business and private purposes?

If an asset is used for both business and private use, you can only claim the taxable purpose portion. So if you use a delivery van 70% for business, you only claim 70% of the total cost.

The entire cost of the asset still has to be under $20,000 – not just the business portion. You also need records showing how you split business and personal use. Keep receipts and invoices for this.

What happened to temporary full expensing?

The temporary full expensing scheme ended on 30 June 2023. Under that scheme, there was no cost limit – businesses could immediately deduct the full cost of eligible assets regardless of price.

Since 1 July 2023, the instant asset write-off rules apply with the $20,000 threshold. You can’t claim deductions under temporary full expensing for any asset installed or improved after 30 June 2023.

How do trade-ins and improvements work?

If you trade in an old asset, the total cost of the new asset determines eligibility – not the out-of-pocket amount after the trade. If the new asset costs $20,000 or more, it goes into the small business pool regardless of what you paid after the trade-in.

You can also claim an instant deduction for the second element cost of an asset already written off in a prior year. So you can claim improvements on certain assets, so long as the improvement cost is under $20,000.

How do you apply and record the instant asset write-off?

You claim the instant asset write-off on your tax return for the relevant financial year. Keep good records, including the purchase date, total cost, taxable purpose portion, and more.

Always check the ATO for the latest rules and use cloud accounting software to track your business expenses and depreciation.

That way, you’ll be able to claim every eligible tax benefit and keep your business on the path to better cash flow and business growth.