- Instant asset write-off can significantly reduce taxable income
Eligible small businesses can immediately deduct the cost of qualifying assets under the threshold instead of depreciating them over several years. - Timing matters when claiming the deduction
The asset must be first used or installed ready for use within the relevant financial year to qualify for the instant asset write-off. - Accurate records are essential for claiming correctly
Maintaining invoices, payment records, and business-use documentation ensures deductions are valid and compliant with ATO requirements.
Instant asset write-off is one of the most valuable tax breaks available to small businesses in Australia, yet many companies don’t fully take advantage of it. The rule allows eligible businesses to immediately deduct the cost of certain assets instead of depreciating them over several years, helping reduce taxable income and improve cash flow.
However, the rules around eligibility, thresholds, and asset types can be confusing. In this guide, we’ll explain how the instant asset write-off works in Australia, who qualifies, and how businesses can use it effectively. We’ll also highlight how working with professional accounting services can help ensure assets are claimed correctly and aligned with current ATO requirements.
Plan asset purchases before the end of the financial year. If a qualifying asset is installed and ready for use before 30 June, the deduction can usually be claimed in that year, helping reduce taxable income sooner.
What is the instant asset write-off in Australia?
The instant asset write-off allows eligible small businesses to immediately deduct the business portion of the cost of certain depreciating assets in the same income year the asset is first used or installed ready for use. Instead of claiming the deduction over several years through depreciation, businesses can claim the full deduction upfront.
- This can reduce taxable income in the year the asset is claimed, helping improve cash flow and allowing businesses to reinvest funds into operations, equipment, or growth initiatives sooner.
- The instant asset write-off is part of the Australian Government’s small business tax measures designed to encourage business investment.
- The threshold and eligibility rules may change over time through federal budget decisions, so businesses should always check the current ATO rules before claiming the deduction.
Turn your business purchases into smarter tax deductions
Who can use instant asset write-off?
Eligibility mainly depends on your business’s aggregated turnover. For assets first used or installed ready for use between 1 July 2025 and 30 June 2026, the scheme applies to small businesses with aggregated annual turnover under $10 million.
- It doesn’t matter if you’re a sole trader, partnership, company, or trust, as long as you meet the turnover threshold and other basic conditions.
- Your business must also be actively trading and generating income. Simply holding assets without using them in your operations won’t count.
To qualify:
- The asset must be used (or installed and ready for use) for a taxable purpose, that is, as part of your day-to-day business activity.
- Asset cost thresholds apply depending on when the asset was purchased and first used.
For the 2025–26 financial year, eligible businesses can immediately deduct assets costing less than $20,000 per asset.
What assets can be written off?
The instant asset write-off applies to a wide range of tangible business assets, both new and second-hand, as long as they’re used for income-generating purposes.
Common eligible assets include:
Trade tools and equipment
Farming machinery
Office gear like computers, printers, and phones
Business vehicles
Office furniture and retail/shop fittings
These assets must be physical (tangible) and used in the day-to-day operations of your business. The flexibility to include second-hand assets makes the scheme especially useful for smaller businesses with tighter budgets.
Excluded assets under the scheme generally include:
Assets leased out under a depreciating asset lease
Horticultural plants
Capital works such as buildings and structural improvements (covered under different depreciation rules)
Certain intangible assets, such as in-house developed software, which are generally not eligible for the instant asset write-off
For edge cases or large purchases, it’s worth checking with the ATO or speaking to your accountant to confirm eligibility.
Instant asset write-off is often most effective when combined with broader tax planning. Businesses that coordinate asset purchases with cash flow, depreciation schedules, and other deductions can significantly improve overall tax efficiency rather than treating the write-off as a standalone tax benefit.
What are the current thresholds?
The threshold for the instant asset write-off has seen several changes, reflecting shifting economic conditions and government policies announced in the federal budget.
- It is essential to check the threshold applicable for the specific income year you purchase and use the asset.
- For assets first used or installed ready for use between 1 July 2025 and 30 June 2026, the threshold is $20,000 per asset for small businesses with an aggregated turnover below $10 million.
- This $20,000 threshold applies on a per-asset basis, meaning businesses can potentially claim the write-off for multiple assets, provided each individual asset cost is below the threshold.
Here’s a brief look at how thresholds have changed recently:
Income year | Applicable turnover | Asset threshold | Remarks |
1 July 2025 – 30 June 2026 | Less than $10 million | $20,000 | Applies per asset; must be first used or installed ready for use within this period. |
1 July 2024 – 30 June 2025 | Less than $10 million | $20,000 | Applies per asset; must be used or installed ready for use within this period. |
1 July 2023 – 30 June 2024 | Less than $10 million | $20,000 | Applies per asset; must be used or installed ready for use within this period. |
1 July 2020 – 30 June 2023 | Less than $5 billion | No threshold (Temporary Full Expensing) | Eligible businesses could deduct the full cost of eligible depreciating assets. |
12 March 2020 – 30 June 2020 | Less than $500 million | $150,000 | COVID-19 stimulus increased the instant asset write-off threshold. |
Before 12 March 2020 | Various (e.g., less than $50 million) | Various (e.g., $30,000) | Thresholds changed frequently before 2020. |
Always verify the current rules directly via the Australian Taxation Office website or by consulting a registered tax advisor.
Relying on outdated information could lead to incorrect claims in your income tax return. Understanding the threshold relevant to your purchase date and annual turnover is fundamental.
How does instant asset write-off work?
Scenario
You run a small graphic design company with $2 million in annual turnover (for the year ending 30 June 2026). In November 2025, you buy a high-performance computer for your design work that costs $15,000 (excluding GST).
Why you qualify
- Your business turnover is under $10 million.
- The computer costs under $20,000
- You bought, received, and had it installed within the 2025–26 financial year
Tax benefit
With instant asset write-off scheme, you can:
- Claim the full $15,000 as a deduction on your 2025–26 tax return.
- This reduces your taxable income, meaning you pay less tax for the year.
- Without this scheme, you would normally depreciate the asset over several years and claim a portion of the cost each year instead.
Important conditions
- The asset must be used mainly for business purposes.
- If it’s used partly for personal use, only the business-use portion is deductible.
Example:
If 80% of its use is for business, you can claim 80% of $15,000 = $12,000.
Plan your asset purchases with expert tax guidance
What if the asset exceeds the threshold?
If an asset costs more than the $20,000 instant asset write-off threshold for the 2025–26 income year, it can’t be claimed as an immediate deduction. Instead, it must be depreciated over time using the general or simplified depreciation rules, depending on your business’s eligibility.
Here’s how it works:
If you use simplified depreciation rules (small business pool):
The asset is added to your small business pool
You can claim a 15% deduction in the first year it’s allocated to the pool
The remaining pool balance is then depreciated at a 30% rate in following years
If you don’t use simplified depreciation rules:
The asset must be depreciated using general depreciation rules
This involves claiming deductions over the asset’s effective life based on its cost
Understanding these depreciation pathways ensures you don’t miss out on eligible deductions, even if the asset doesn’t qualify for an instant write-off.
Simplified depreciation and the small business pool
If your business has an aggregated turnover under $10 million, you can opt into simplified depreciation rules, designed to streamline asset depreciation for small businesses.
Here’s how it works:
Instant asset write-off is part of this framework
Assets under the threshold (e.g. $20,000 in the 2025–26 income year) are written off immediately
This reduces admin and boosts your cash flow quickly
Assets at or above the threshold:
These go into your small business pool
The pool balance (combined value of applicable assets) is depreciated at:
15% in the first year, and
30% in each subsequent year
If you opt out of simplified depreciation in a given year, you can’t claim the instant asset write-off for low-cost assets in that same year.
If you’re unsure about your eligibility or whether pooling suits your business, it’s worth speaking to the ATO or a registered tax advisor to clarify your best move.
5 benefits of instant asset write-off
The instant asset write-off scheme provides several advantages for eligible businesses:
1. Better cash flow management
Claiming the full deduction in the year of purchase lowers your taxable income upfront. That means you pay less tax now, freeing up cash to reinvest into your operations, hire, or scale.
2. Simplified depreciation. Less admin
Assets under the threshold don’t need to be tracked and depreciated year after year. You claim the full deduction once, and you’re done. That means fewer spreadsheets and lower accounting fees at tax time.
3. Incentivises smarter business spending
By reducing the after-tax cost of eligible assets, the scheme makes it more affordable to invest in what your business needs, from new equipment to technology upgrades.
4. Drives efficiency and growth
New tools and assets help you do more with less. Whether it’s speeding up production or improving customer delivery, the right investment can boost productivity and support long-term growth.
5. Flexibility to buy multiple assets
The write-off applies per asset, not per business. So, you can claim multiple deductions within the same year, as long as each item qualifies. Perfect if you’re planning a bulk upgrade.
Instant asset write-off: What to consider before you buy
While the instant asset write-off is a great tool for boosting cash flow and upgrading your business, it’s not a blanket “buy now” strategy. Before you rush into a purchase, consider these practical points:
How to claim instant asset write-off in 5 steps
Claiming the instant asset write-off is done through your annual business tax return. But to stay compliant and maximise your deduction, you’ll need to get the details right.
Step 1: Confirm you’re eligible
Your business must have an aggregated turnover of less than $10 million for the income year in which the asset is first used or installed ready for use.
The asset must be on the ATO’s eligible list. Excluded items include:
Capital works (e.g. buildings or structural improvements)
Horticultural plants
Leased assets on a depreciating lease
Step 2: Check the timing
The asset must be:
First held, and
First used or installed ready for use in the income year you are claiming the deduction.
Step 3: Calculate your deduction
Use the full asset cost (excluding GST if you’re registered and claiming credits).
If used partly for private purposes, calculate the business-use percentage.
Example:
If 80% business use, you can only claim 80% of the cost.
As long as the business-use portion of the cost is below the $20,000 threshold for the 2025–26 income year, you can write it off in full.
Step 4: Lodge it with your tax return
Include the deduction in the correct section of your business tax return.
If using the simplified depreciation rules, the write-off is handled under those.
Step 5: Keep detailed records
Retain:
Receipts or tax invoices
Proof of payment
Installation and usage documentation
If you apportion for mixed use, store a clear calculation (e.g. logbooks for vehicles). The ATO may ask for this during a review or audit.
Bonus tip
The rules can get tricky for grouped assets, part-use items, or unclear cost thresholds. Don’t guess. A registered tax agent or accountant can help you claim it correctly and ensure you’re not missing out on money you’re entitled to.
The instant asset write-off reduces taxable income, not the full purchase cost. The tax benefit depends on your applicable tax rate, meaning the deduction lowers the income you’re taxed on rather than providing a direct refund.
How Sleek helps businesses manage instant asset write-offs and stay compliant
Claiming the instant asset write-off correctly requires accurate records, proper asset tracking, and the right tax reporting. Sleek helps simplify this process so businesses can claim eligible deductions while staying compliant with ATO requirements.
With Sleek, you get:
- End-to-end accounting support
From bookkeeping and BAS lodgements to annual tax returns, we keep your financial records organised and ready for tax time. - ATO-compliant tax reporting
Our accountants ensure your tax returns and deductions are prepared accurately and submitted on time. - Dedicated accountant support
Work with experienced professionals who help you understand what you can claim and keep your business finances on track. - Transparent, all-inclusive pricing
Clear and predictable pricing with no hidden fees, so you always know exactly what you’re paying for.
Simplify your accounting, claim eligible deductions confidently, and stay compliant with Australian tax rules with Sleek.
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Frequently Asked Questions
Can I claim the instant asset write-off if I finance the asset instead of paying upfront?
Yes. The instant asset write-off can still apply if the asset is purchased using financing arrangements such as chattel mortgages or hire purchase agreements, provided your business holds the asset for tax purposes. What matters is that the asset is first used or installed ready for use within the relevant income year, not whether it has been fully paid off.
What happens if my asset is used partly for business and partly for personal use?
If an asset has mixed use, only the business-use portion of the asset cost can be claimed under the instant asset write-off. Businesses must calculate and document the percentage of business use and apply that percentage to the total asset cost before claiming the deduction.
How does the instant asset write-off affect depreciation reporting in future years?
Once an asset is written off under the instant asset write-off, it cannot be depreciated again in future years because the full deduction has already been claimed. Businesses must still record the asset in their financial records, even though its tax value has been written down to zero.
