If your business has aggregated turnover under $10 million, the instant asset write-off lets you deduct the full cost of eligible assets costing less than $20,000 each in the year you first use them or have them installed ready for use, instead of depreciating them over several years. The $20,000 threshold applies for the 2025–26 income year and is currently set to expire on 30 June 2026.1Australian Taxation Office. Instant Asset Write-Off for Eligible Businesses Without an extension from Parliament, the limit reverts to $1,000 from 1 July 2026.
Who Qualifies
Eligibility comes down to one test: your aggregated turnover for the income year must be below $10 million. Aggregated turnover is your ordinary business income (excluding GST) combined with the turnover of any connected entities and affiliates.2Australian Taxation Office. Taxation Determination TD 2021/7 – Aggregated Turnover
A connected entity is one that controls, or is controlled by, your business. An affiliate is a person or entity that acts in accordance with your directions. A sole trader who also holds a controlling interest in a company has to add both turnovers together. Overlooked related-party turnover is one of the first things the ATO checks during a review of a depreciation claim.
Which Assets Are Eligible
A depreciating asset is a tangible item with a limited useful life that loses value over time: computers, tools, furniture, vehicles, machinery. Both new and second-hand items qualify, as long as you acquire them for use in generating assessable income and they are actually used, or installed ready for use, before the end of the income year in which you claim.
Only the business-use portion is deductible. A $1,800 laptop used 70 percent for work gives you a $1,260 deduction. You need documentation for that split: a logbook for vehicles, diary entries for shared equipment. The business-use percentage is one of the most commonly adjusted items in small business audits.
GST and the Threshold
Whether the $20,000 threshold is measured GST-inclusive or GST-exclusive depends on your registration.1Australian Taxation Office. Instant Asset Write-Off for Eligible Businesses If your business is registered for GST and entitled to a full input tax credit, use the GST-exclusive cost. An item marked at $21,999 including $2,000 GST has a GST-exclusive cost of $19,999, which falls under the threshold. If you are not registered for GST, use the full GST-inclusive price.3Australian Taxation Office. The Cost of a Depreciating Asset
The cost also includes delivery, installation, and any modifications needed to make the item work for your business. Trade-in amounts are not subtracted when testing the threshold.
The Car Cost Limit
Passenger vehicles are treated separately. For 2025–26, the car cost limit is $69,674, which applies to cars designed to carry fewer than nine passengers and less than one tonne, excluding motorcycles.4Australian Taxation Office. Changes to Car Thresholds From 1 July5Australian Taxation Office. Assets and Exclusions Because the car limit sits well above $20,000, a car priced at or near that limit cannot be instantly written off. It goes into the small business pool instead.
What’s Excluded
Some assets cannot be claimed under the simplified depreciation rules at all, no matter your turnover:
- Buildings and structural improvements, which fall under Division 43 capital works and depreciate over 25 or 40 years.6Australian Taxation Office. Appendix 2 – Capital Works Deductions
- Horticultural plants, which have their own depreciation schedule.
- Assets you own but lease out on a long-term basis.
- Most intangibles, including most software, unless developed in-house for the business’s own use.5Australian Taxation Office. Assets and Exclusions
Misclassifying an asset can mean a reversed deduction and interest on the resulting shortfall. Sort each purchase into the correct depreciation pathway at the time of acquisition.
Assets Over $20,000: The Small Business Pool
If an eligible asset costs $20,000 or more, you cannot write it off instantly. It goes into your general small business pool and is depreciated at set rates.7Australian Taxation Office. Small Business Support – $20,000 Instant Asset Write-Off
- 15 percent of the asset’s taxable-purpose cost in the first year, regardless of when during the year you acquired it.
- 30 percent of the pool’s opening balance in each subsequent year.
- Improvements to a pooled asset are deducted at 15 percent in the year the improvement is made.8Australian Taxation Office. Small Business Pool Calculations
Those rates apply to the taxable-purpose proportion, not the total cost. A $25,000 machine used 80 percent for business enters the pool at an effective cost of $20,000. First-year deduction: $3,000. Then 30 percent of the remaining balance in each following year.
Low Pool Balance Write-Off
If the closing balance of your small business pool falls below $20,000 at the end of the 2025–26 income year, you can write off the entire remaining balance in that year.7Australian Taxation Office. Small Business Support – $20,000 Instant Asset Write-Off Businesses that have carried a pool for years often keep depreciating it out of habit. Check the balance before you finalise your return.
Selling an Asset You Already Wrote Off
This trips up a lot of small businesses. If you instantly wrote off an asset and later sell it, the full sale price is assessable income. The asset’s adjustable value is zero because you already deducted the entire cost, so whatever you receive on disposal is taxable.9Australian Taxation Office. Disposal of a Depreciating Asset
Wrote off a $15,000 piece of equipment two years ago and sold it today for $8,000? The full $8,000 goes into assessable income in the year of sale. If the asset was only partly used for business, the termination value is reduced by the private-use proportion before being applied.
For pooled assets, sale, loss, or destruction reduces the pool balance by the termination value times the taxable-use proportion. Insurance payouts count as termination value. If those reductions push the pool balance negative, the negative amount becomes assessable income.8Australian Taxation Office. Small Business Pool Calculations A substantial insurance payout on heavily depreciated equipment can produce an unwelcome tax bill.
Claiming and Keeping Records
The deduction goes on the small business depreciating assets labels of your business tax return, with the specific labels depending on whether you operate as a sole trader, partnership, trust, or company.
Records must be kept for at least five years. That means purchase receipts, invoices, logbooks supporting your business-use percentage, and any worksheets you used to calculate the deduction.10Australian Taxation Office. Overview of Record-Keeping Rules for Business If the ATO opens a review and you cannot produce them, the deduction can be reversed entirely.
The 30 June 2026 Deadline
Three things share the same expiry date of 30 June 2026: the $20,000 threshold, the ability to write off a low pool balance under $20,000, and the suspension of the five-year lock-out that normally applies when a business leaves the simplified depreciation system.11Australian Taxation Office. Simpler Depreciation Rules for Small Business12Australian Taxation Office (Small Business). Using Simplified Depreciation Rules Again Unless Parliament extends these measures, from 1 July 2026 the threshold drops to $1,000, pool balances can no longer be cleared out in a single hit, and a business that opts out of simplified depreciation faces the full five-year wait before returning.
The government has extended or modified the write-off in most budget cycles, but that is not a guarantee. If you have equipment purchases planned around mid-2026, having the asset installed and ready for use before 30 June is the only way to lock in the current $20,000 threshold.