After years of one-year extensions, the $20,000 instant asset write-off is now a permanent feature of the tax system for small businesses. From 1 July 2026 a business with turnover under $10 million can immediately deduct the full cost of each eligible asset costing less than $20,000, instead of depreciating it over several years. This guide explains who qualifies, what counts, and how to time purchases to get the most from it.
What changed from 1 July 2026
The $20,000 threshold applied to 2023-24, 2024-25 and 2025-26 under three separate temporary measures, each legislated late in the year it applied to. In the May 2026 Budget the Government announced that the $20,000 threshold would be made permanent from 1 July 2026, and the ATO confirms the measure is now law. Small businesses can finally plan equipment purchases without waiting to see whether the threshold will fall back to $1,000.
Who is eligible
- You carry on a business and your aggregated turnover is under $10 million (your turnover plus that of connected and affiliated entities)
- You use the simplified depreciation rules for small business. If you opted out of them in a previous year, the usual five-year lock-out is suspended until 30 June 2027, so you can opt back in
- The asset is used, or installed ready for use, for a taxable purpose in the year you claim it
How the $20,000 limit works
- The limit applies per asset. A business can write off several assets in the same year as long as each one costs less than $20,000
- The cost includes delivery and installation. If you are registered for GST and can claim the GST credit, the threshold is tested on the GST-exclusive price; if you are not registered, it is the GST-inclusive price
- Only the business-use portion is deductible. A $15,000 ute used 70% for business gives a $10,500 deduction, but the whole asset must still cost less than $20,000 to qualify
- New and second-hand assets both qualify
Assets costing $20,000 or more
Assets at or above the threshold go into the small business general pool and are depreciated at 15% in the first year and 30% each year after that, regardless of how long the asset will actually last. If the pool balance falls below $20,000 at the end of the year, the whole balance can be written off. This is where the real planning happens for businesses buying vehicles and larger equipment.
What is excluded
- Assets leased out to others for more than half the time
- Horticultural plants, software allocated to a software development pool, and capital works such as buildings and structural improvements, which have their own rules
- Cars are eligible, but the car limit still caps the depreciable cost of a passenger vehicle, and the luxury car rules apply to anything above it
- Assets bought for a business that has not started trading yet
Timing and cash flow
The deduction is claimed in the year the asset is first used or installed ready for use, not the year you pay for it. An asset ordered in June but delivered in July belongs to the following year. A deduction only saves tax if the business has taxable income to offset, so buying equipment you do not need in order to “get the write-off” leaves you with less cash, not more. The write-off reduces the tax bill by the deduction multiplied by your tax rate; it is not a refund of the purchase price.
Frequently asked questions
Does the write-off apply to sole traders?
Yes. Sole traders, partnerships, companies and trusts can all use it if they carry on a business with aggregated turnover under $10 million. Employees cannot.
Can I claim a $19,999 asset bought on finance?
Usually yes if it is bought under a chattel mortgage or similar loan where you own the asset. Assets under an operating lease are owned by the lessor, so the lease payments are deducted instead.
Does it affect my BAS?
No. GST credits on the purchase are claimed on your BAS in the usual way. The write-off is an income tax deduction claimed in the business tax return.
Small business tax advice in Melbourne’s west
Kennedy Tax & Business Services prepares tax returns, depreciation schedules and BAS for small businesses across Footscray, Williams Landing and Melbourne’s west. See our business advisory and BAS lodgement services, or contact us before making a large purchase so it is timed correctly.
This article is general information only and does not take into account your personal circumstances. Based on ATO guidance current at October 2026. Speak to a registered tax agent before acting.
