What small businesses can claim under $20,000 instant asset write-off?
Planning to purchase new equipment for your business?
The $20,000 instant asset write-off could reduce your tax bill significantly, but only if you meet the rules.
This blog post is for small business owners, sole traders, and company directors in Australia who are planning to invest in tools, equipment, vehicles, or business assets in their business.
Here, you will learn:
- What the $20,000 instant asset write-off is and how it works
- Who is eligible and what conditions apply
- Exactly what assets you can and cannot claim
- Common mistakes that can lead to rejected claims
- How to maximise your deduction each financial year
The Federal Budget 2026 confirmed the $20,000 instant asset write-off is now a permanent feature of the Australian tax system. Previously renewed on a temporary basis year by year, it is now permanently legislated from 1 July 2026, giving you the certainty to plan and invest with confidence.
Key takeaways
The $20,000 instant asset write-off is now a permanent feature of the Australian tax system, confirmed in the Federal Budget on 12 May 2026.
Small businesses with turnover under $10 million can immediately claim the full cost of eligible assets in the same financial year.
Assets must be installed and ready for use before 30 June of the income year you are claiming.
Your business must use simplified depreciation rules to access the write-off.
The $20,000 limit applies per asset, allowing multiple claims if each item is below the threshold.
A wide range of assets including tools, vehicles, and equipment can be claimed if used for business purposes.
The threshold is not indexed and remains at $20,000 until further legislation changes it.
What is the $20,000 instant asset write-off?
The $20,000 Instant Asset Write-Off is a tax concession that allows eligible Australian small businesses to immediately claim the full cost of qualifying business assets in the same financial year they are first used or installed ready for use.
Instead of depreciating assets over several years, eligible businesses can deduct the entire cost upfront, helping reduce taxable income and improve cash flow sooner.
The threshold applies per asset, meaning multiple business purchases may qualify if each individual item costs less than $20,000. For GST-registered businesses, the threshold applies to the GST-exclusive price. Businesses not registered for GST use the GST-inclusive cost instead.
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Instant asset write-off vs Depreciation
One of the biggest advantages of the Instant Asset Write-Off is the ability to claim the full deduction immediately rather than spreading deductions across multiple years through depreciation.
| Instant asset write-off vs Depreciation | |
|---|---|
| Instant asset write-off | Depreciation |
| Immediate full deduction | Deduction spread over years |
| Improves short-term cash flow | Smaller yearly deductions |
| Simpler record keeping | Ongoing depreciation schedules |
| Faster tax benefit | Slower tax recovery |
| Best for assets under threshold | Used for higher-cost assets |
For many small businesses, claiming the deduction upfront can free up cash flow sooner and make business investment more affordable. However, assets costing $20,000 or more generally need to be depreciated through the small business depreciation pool instead.
Who is eligible for the $20,000 instant asset write-off?
To qualify for the $20,000 Instant Asset Write-Off in 2025–26, your business must meet the following conditions set by the Australian Taxation Office (ATO). Not all businesses qualify, and getting the details wrong could mean your deduction is rejected at tax time.
- Your aggregated annual turnover is less than $10 million. This includes the turnover of any business entities affiliated with or connected to yours.
- You must elect to use the simplified depreciation rules for the income year you are claiming. This is a key requirement. The IAWO is only available under these rules.
- The total cost of the asset must be less than $20,000. If you are registered for GST, this is the GST-exclusive price. If you are not registered for GST, the threshold includes GST.
- The asset must first be used or installed, ready for use, for a taxable business purpose before 30 June of the income year you are claiming.
- The write-off applies to both new and second-hand assets. This provides you flexibility to purchase used equipment, machinery, or technology and still claim the full deduction immediately.
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What does "Installed Ready for Use" actually mean?
This phrase is critically important and is one of the most common points of confusion for small business owners. Many assume that simply purchasing or ordering an asset before 30 June is enough to qualify. It is not.
The ATO requires the asset to be first used or installed and ready for use by 30 June of the relevant income year. The asset must be operational by that date, not just ordered or paid for.
If you order equipment on 25 June but it is delivered on 3 July, you cannot claim the write-off for that financial year. You would instead claim it in the following year, which is now straightforward since the write-off is permanent.
This is especially relevant for businesses ordering machinery, specialised equipment, or technology with longer delivery or installation timeframes. Planning early each financial year ensures your purchases are ready for use well before 30 June.
What assets qualify for the $20,000 instant asset write-off?
This is the question most small business owners want answered. The good news is that a wide range of assets are eligible, provided each item costs less than $20,000, is used for business purposes, and is first used or installed ready for use before 30 June of the relevant income year. Here is a breakdown by category.
Tools, equipment & machinery
Tradespeople, construction businesses, hospitality operators, and manufacturers are among the groups that benefit most from this category. Eligible assets include:
- Tools and equipment used by tradies for day-to-day work
- Kitchen equipment and coffee machines for cafés and restaurants
- Computers, laptops, tablets, and general office equipment
- Commercial refrigeration units used in hospitality or retail
- Salon and beauty equipment, such as chairs, dryers, and treatment devices
- Medical and dental equipment used in clinics
- Specialised machinery used in workshops or manufacturing
For example, a plumber purchasing a pipe inspection camera for $8,500, or a cafe owner upgrading to a commercial coffee machine for $15,000, can claim the full cost as an immediate deduction in their annual tax return, rather than spreading it over several years.
Technology & office equipment
This is one of the most accessible categories for office-based businesses, professional services firms, and sole traders. Eligible items include:
- Laptops
- Desktop computers
- Tablets
- Monitors
- Printers
- Scanners
- Point-of-sale (POS) systems
- Business-use mobile phones
- Server equipment
- Networking devices
Whether you are upgrading your accounting software infrastructure, replacing ageing computers, or setting up a cloud-based system, the write-off can significantly reduce the upfront cost.
Vehicles (with conditions)
Vehicles can be claimed under the $20,000 instant asset write-off, but only if certain conditions are met.
There are two main types of vehicles.
- Cars are vehicles that carry less than 1 tonne and fewer than 9 passengers.
- Other vehicles include trucks, heavy utes over 1 tonne, vans, motorcycles, and vehicles designed to carry 9 or more passengers.
If you purchase a vehicle for $20,000 or less and use it for business, you can claim the cost immediately in the same financial year. However, this is only allowed if you are using the logbook method for cars or the actual cost method for other vehicles.
If you use the cents-per-kilometre method, you cannot claim the vehicle purchase separately because depreciation is already included in that method. If the vehicle costs more than $20,000, it is not eligible for the instant asset write-off. Instead, the cost must be claimed over time through depreciation.
If the vehicle is used for both business and personal purposes, you can only claim the business portion of the cost and expenses. For cars, the maximum claimable amount is capped at $69,674 regardless of the purchase price. Any amount above this limit cannot be claimed.
Furniture & fit-out items
Businesses setting up a new office, retail space, or studio can also take advantage of the write-off for individual furniture and fit-out items costing less than $20,000 each. This includes office desks, ergonomic chairs, shelving units, display cabinets, reception counters, and storage solutions.
What assets are NOT eligible for instant asset write-off?
While the scope of the IAWO is broad, there are important exclusions to be aware of. Claiming an ineligible asset could result in the ATO disallowing your deduction, so it pays to know what does not qualify.
- Assets costing $20,000 or more: Assets valued at $20,000 or more can continue to be placed into the small business pool and depreciated at 15% in the first income year and 30% each income year after that. They cannot be claimed under the instant write-off.
- Leased assets: If you lease an asset rather than purchasing it outright, it is not eligible. Assets that are leased, or expected to be leased out, for more than 50% of the time on a depreciating asset lease are excluded.
- Assets not used for business purposes: You can only claim the portion of the asset used for business. If you buy a $10,000 laptop but use it 20% of the time for personal use, your actual deduction will be $8,000. However, the entire cost of the asset must still be under the $20,000 threshold to qualify for the instant write-off in the first place.
- Building improvements and capital works: These fall under separate capital works depreciation rules and are excluded from the simplified depreciation framework.
- Assets excluded from simplified depreciation rules: Certain assets, including those previously allocated to a low-value pool, are excluded from the rules that underpin the IAWO.
- Capital Works: This includes buildings and structural improvements.
- Research and Development (R&D): Any assets used specifically in your R&D activities.
- Software Development Pools: Software that has been allocated to a software development pool (note that other general business software may still be eligible).
- Horticultural Plants: This includes items such as grapevines.
Instant asset write-off example (how much tax you save)
Understanding how this works helps you see the real value of the incentive. The Instant Asset Write-Off reduces your taxable income in the financial year you purchase the asset, which directly lowers the tax you need to pay. The asset is not free; you still have to spend money. The benefit is that the tax saving is realised immediately, rather than spread over several years through depreciation.
$20,000 instant asset write-off example:
- The Buyer: Sam runs a repair shop with a $500,000 turnover.
- The Purchase: A $15,000 diagnostic scanner bought in March 2026.
- The Deduction: Since it is under the $20,000 limit, Sam claims the full $15,000 at once.
- The Tax Saving: At a 25% company tax rate, Sam reduces his tax bill by $3,750 this year.
Without this rule, Sam might only claim 15% ($2,250) in year one, saving just $562.50 in tax. By using the write-off, Sam keeps an extra $3,187.50 in his bank account right now to reinvest in his business.
If Sam used the scanner 20% of the time for personal projects, his deduction would simply adjust to 80% ($12,000). He still qualifies because the total price was under the $20,000 cap, but he only claims the business portion.
This shows why tracking your business-use percentage is just as vital as the price tag on your tax return each year.
Before you purchase any asset, check this
Before committing to any purchase, it is important to run through a few key checks to ensure the asset qualifies and the deduction can be claimed correctly.
- Is the cost under $20,000 per asset?
The full purchase price must be below the instant write-off threshold. - Will the asset be ready for use before 30 June of the income year you are
claiming?
The asset must be installed and operational, not just purchased. - Is the asset used for business purposes?
Only the business-use portion can be claimed if there is any private use. - Are you using simplified depreciation rules?
This is required to access the instant asset write-off. - Do you have proper documentation?
Invoices, payment records, and usage details are essential to support your claim.
Common mistakes small businesses make with write-offs
Each year, many Australian small businesses miss out on valid deductions or have claims denied due to avoidable errors. Here are some of the most common mistakes when claiming the $20,000 Instant Asset Write-Off.
Leaving purchases too late
One of the biggest mistakes is waiting until the
last minute to act. Delivery delays, installation time, and supplier availability can push your
asset beyond 30 June. Plan early each financial year and ensure assets are fully operational
before the end of the income year.
Misunderstanding the threshold
The total cost of the asset must be under
$20,000, not just the business-use portion. Even if your business use is below $20,000, the full
purchase price must still meet the threshold.
Forgetting to apportion private use
If an asset is used for both personal and
business purposes, you can only claim the business-use portion. Incorrect apportionment can
raise issues during ATO reviews.
Not opting into simplified depreciation rules
To access the write-off, you
must elect to use simplified depreciation rules on your tax return. Missing this step can make
your claim ineligible.
Claiming ineligible assets
Leased assets, building improvements, and items
mainly used for personal purposes do not qualify. Incorrect claims in these areas can lead to
compliance issues and penalties.
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What does the permanent extension mean for your business?
From 1 July 2026, the $20,000 instant asset write-off became a permanent feature of the Australian tax system. Small businesses no longer need to wait on annual budget announcements or rush purchases before a temporary deadline. Note that this measure is subject to legislation passing parliament.
Here is what this means in practice:
No more annual uncertainty. You can plan asset purchases across financial years based on your actual business needs, rather than racing to beat a June deadline each year.
Better cash flow and planning. The permanent write-off simplifies tax obligations, improves cash flow, and is estimated to save small businesses around $32 million per year in compliance costs.
The threshold is not indexed. The $20,000 limit stays fixed at $20,000 until further legislation changes it. It will not automatically increase each year.
Lock-out rule suspended until 30 June 2027. If your business previously opted out of the simplified depreciation regime, you are normally locked out for five years. This restriction remains suspended until 30 June 2027, meaning you can re-enter the regime now and access the write-off without waiting out the five-year period.
Pool write-off opportunity. If the balance of your small business depreciation pool falls below $20,000 at the end of the financial year, you can write off the entire remaining balance in one go, rather than continuing to depreciate it over time. This is a bonus many small business owners overlook completely.
How does CleanSlate help you maximise your write-off?
Tax time is stressful enough without second-guessing whether your asset purchases actually qualify. We have seen too many small business owners either miss out on legitimate deductions because they were unsure of the rules, or worse, have claims flagged by the ATO because something was recorded incorrectly.
That is exactly why our clients come to us. Not because accounting is complicated, but because their time is better spent running their business rather than reading ATO legislation.
At CleanSlate, we work with business owners every day across industries like trades, hospitality, retail, and professional services. We know what the ATO looks for, we know what gets missed, and we know how to make sure you are claiming everything you are entitled to — nothing more, nothing less.
Beyond just asset write-offs, you can partner with our payroll team to ensure your staff is paid correctly while you focus on scaling your operations.
When it comes to the $20,000 Instant Asset Write-Off specifically, here is what our professional tax accounting support actually looks like in practice:
- We review your planned purchases and clearly tell you which qualify and which do not before you spend the money.
- We check whether your business is correctly set up under the simplified depreciation rules, so your claim holds up at tax time.
- We flag your business pool balance. If it is approaching $20,000, you may be able to write off the entire pool this financial year, which most business owners do not even realise is possible.
- We handle the paperwork, so the deduction is recorded correctly on your tax return the first time.
Now that the write-off is permanent, it is worth getting your records and claims set up correctly from the start. Every year you delay is a year you could be leaving money on the table. A quick call with our team means we can review your asset purchases, confirm what qualifies, and make sure everything is recorded correctly before your tax return is lodged. Book your call today.
$20,000 instant asset write-off FAQs
What is the $20,000 instant asset write-off?
- A permanent tax deduction of up to $20,000 per asset for eligible small businesses.
- Must be used or installed by 30 June of the income year you are claiming.
- Applies to businesses with aggregated turnover of under $10 million.
- Claim the full cost in the same financial year, no depreciation spreading required.
How do I claim the $20,000 Instant Asset Write-Off on my tax return?
To claim the write-off, you need to elect to use the simplified depreciation rules in your tax return for the relevant income year. The eligible asset cost is then included as an immediate deduction in your return. It is strongly recommended to work with a registered tax agent or accountant to ensure the election is correctly made and the deduction is properly recorded.
What records are needed to support an Instant Asset Write-Off claim?
The ATO requires you to keep the following records to substantiate your claim:
- A tax invoice or receipt showing the asset price, supplier details, and purchase date.
- Evidence of when the asset was first used or installed, and is ready for use in your business.
- Records showing the business-use percentage if the asset has mixed personal and business use.
- Bank statements or payment records confirming the purchase was made within the eligible period.
- Asset register entries showing the item has been added to your books.
Does the $20,000 Instant Asset Write-Off affect my GST claim?
The Instant Asset Write-Off is an income tax deduction and is separate from your GST obligations. If your business is registered for GST, you claim the GST credit on your Business Activity Statement (BAS) as you normally would. The write-off deduction is then calculated on the GST-exclusive cost of the asset in your income tax return.
Can I claim the write-off on an asset I purchased overseas?
Yes, provided the asset is used in your Australian business for a taxable purpose and meets all other eligibility conditions. The cost of the asset is assessed in Australian dollars, and it must first be used or installed, ready for use, in your business in Australia by 30 June of the relevant income year.
Can I claim software under the $20,000 Instant Asset Write-Off?
This is a question many business owners overlook, and the answer depends on the type of software. Software that is installed on a physical device, such as operating systems, industry-specific applications, or productivity tools purchased as a one-time licence, may be eligible as a depreciating asset under the write-off rules, provided the total cost is under $20,000.
However, subscription-based software such as monthly or annual SaaS (Software as a Service) plans like Xero, MYOB, or Microsoft 365 is generally treated as an operating expense rather than a depreciating asset. This means it is deductible as a regular business expense, not under the Instant Asset Write-Off.
Can I claim the $20,000 Instant Asset Write-Off on assets I purchased using a business credit card?
Yes. The payment method does not affect your eligibility for the Instant Asset Write-Off. Whether you pay by cash, bank transfer, business credit card, or debit card, what matters is that the asset meets the eligibility conditions.
That said, keeping clear payment records is essential. The ATO requires you to substantiate your claim with documentation, and your credit card or bank statements serve as supporting evidence alongside your tax invoice. If you use a personal credit card for a business purchase, ensure the transaction is clearly documented as a business expense in your records to avoid confusion during a review.
Final thought on $20,000 instant asset write-off
The $20,000 instant asset write-off is now a permanent part of the Australian tax system, and that is genuinely good news for small businesses. No more annual uncertainty. No more racing to beat a June deadline. Just a stable, ongoing entitlement you can plan around every financial year.
Whether you are buying new equipment, upgrading your technology, or refreshing your workspace, the right planning still makes all the difference. Knowing the rules, claiming the right assets, and keeping proper records are just as important as ever.
Every dollar saved on tax is a dollar back in your business. A quick conversation with our tax accounting team means you can be confident you are claiming everything you are entitled to, this year and every year after.
