Instant asset write-off could be the smartest tax break your business isn’t using enough. It lets eligible Australian businesses instantly deduct the cost of certain assets, no waiting years to depreciate. For small and medium-sized companies, that means improved cash flow, faster reinvestment, and less tax stress.
But it’s not a one-size-fits-all scheme. To use it well, you need to understand how it works, who qualifies, and where the limits are. In this guide, we’ll walk you through the essentials, so you can take full advantage without running into ATO surprises.
What is instant asset write-off
Instant asset write-off lets eligible businesses claim a full tax deduction for the business portion of an asset’s cost in the same income year it’s first used, installed, or ready to go. Unlike standard depreciation, which spreads deductions over several years, this gives you the full benefit upfront, improving your tax position faster.
The goal? To reduce your taxable income in the year of purchase and free up cash flow when it matters most. That means more funds to reinvest in your operations or cover day-to-day expenses.
It’s also a strategic move by the government, one that’s often tweaked in the federal budget, to drive investment and boost productivity. For small and growing businesses, it’s a smart way to upgrade equipment while staying on top of tax planning.
P.S.: Claiming big deductions? Make sure you’re not triggering red flags. Avoid these common ATO tax penalties with our guide for Australian businesses.
Who can use instant asset write-off?
Eligibility mainly depends on your business’s aggregated turnover. For 1 July 2023 to 30 June 2024, the scheme applies to small businesses with 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 and vary depending on when the asset was purchased and first used.
P.S.: Still unsure about eligibility or compliance?
Explore our guide to Australian tax compliance and keep your business on track as you scale.
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, like in-house developed software (eligibility can vary)
For edge cases or large purchases, it’s worth checking with the ATO or speaking to your accountant to confirm eligibility.
Do you need to track asset purchases and depreciation easily?
Check out our guide on top accounting platforms for 2025 that help simplify tax time.
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 the income year ending 30 June 2024, 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 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 | Proposed, per asset. Must be used/installed in 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 | Increased threshold during early COVID-19 response. |
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.
Need help tracking expenses that haven’t been paid yet?
Learn how accrued expenses impact your financials and tax deductions. Read our guide on accrued expenses for Australian businesses.
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 2024). In November 2023, 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 2023–24 financial year ✅
💰 Tax Benefit
Thanks to the instant asset write-off scheme, you can:
- Claim the full $15,000 as a deduction on your 2023–24 tax return.
- This reduces your taxable income, meaning you pay less tax for the year.
Without this scheme, you’d need to depreciate the asset over several years—claiming a portion 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.
Let’s consider an example. Imagine you operate a small graphic design studio structured as a company, with an aggregated annual turnover of $2 million for the financial year ending 30 June 2024. In November 2023, you purchase a high-performance computer system specifically for graphic design work, costing $15,000 (excluding GST).
Because your business meets the eligibility criteria (turnover under $10 million) and the asset cost ($15,000) is below the $20,000 threshold for that income year, you can claim the entire $15,000 as a tax deduction in your 2023-24 tax return. The computer must be delivered and installed ready for use within this same income year. This provides an immediate benefit by reducing your company’s taxable income for that year by $15,000.
Without the instant asset write-off scheme, you would typically use standard depreciation rules. This would involve claiming deductions for the computer’s cost over several years based on its effective life. The instant asset write-off accelerates this process, allowing the full deduction upfront for eligible assets, which helps with understanding instant asset write-off benefits.
It’s important that the asset purchased is primarily used for business purposes. If an asset is used for both business and private purposes, you can only claim the instant asset write-off for the portion related to its business use. You must calculate this percentage and apply it to the asset cost before claiming the deduction.
P.S.: Want to know how your $15,000 deduction affects your tax bill? Check out the 2024-25 tax brackets here.
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What if the asset exceeds the threshold?
If an asset costs more than the $20,000 instant asset write-off threshold for the 2024–25 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 2024–25) 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:
- 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. - 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. - 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. - 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. - 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 writeoff: 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:
Consideration | What it means for your business |
Business use only | You can only claim the portion of the asset used for business. For mixed-use items like vehicles, keep accurate records (e.g. logbooks) to justify the business-use percentage. |
It’s a deduction and not a refund | The write-off reduces your taxable income, not your tax bill directly. If your business isn’t making a profit, the benefit may be limited in the short term. |
Don’t buy just for tax reasons | A deduction shouldn’t drive a bad decision. Make sure the asset aligns with your goals, solves a real problem, or adds long-term value. |
Car cost limits apply | For FY 2024–25, the maximum write-off or depreciation claim for passenger vehicles is capped at $69,674. Even if the car costs more, you can only claim up to this limit for depreciation or instant asset write-off purposes. |
Total asset costs matter | The cost includes the purchase price (minus GST credits) plus costs to get the asset operational, like delivery, installation, and set-up. Always calculate the full cost before claiming. |
P.S: Need help working out GST on business purchases or asset claims? Check out our simple guide to calculating GST for business owners, clear, quick, and ATO-compliant.
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 maximize your deduction, you’ll need to get the details right. Here’s how to do it in five clear steps:
Step 1: Confirm you’re eligible
- Your business must have an aggregated turnover of less than $10 million for the 2024–25 income year.
- 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 2024–25 income year.
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.
- E.g. 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, 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.
- Unsure about labels or codes? A tax agent or accountant can make it seamless.
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.
How the instant asset write-off interacts with other tax rules
The instant asset write-off doesn’t operate in a vacuum. It interacts closely with other Australian tax provisions, especially depreciation methods available to small businesses.
General vs. Simplified Depreciation
- Businesses not using simplified depreciation must fall back on the general depreciation rules for assets above the write-off threshold. This means calculating decline in value based on effective life, using either:
- Prime cost method (straight-line depreciation)
- Diminishing value method (accelerated depreciation)
- Small businesses using simplified depreciation:
- Assets below the threshold can be written off immediately.
- Assets at or above the threshold are added to the small business pool, depreciated at:
- 15% in the first year
- 30% in subsequent years
- If the entire pool balance falls below the threshold at year-end, that too can be written off.
Can you claim if you finance an asset?
Yes, the instant asset write-off also applies to assets purchased through financing arrangements like:
- Chattel mortgages
- Hire purchase agreements
What matters is when the asset is:
- First held and
- First used or installed ready for use
Bonus point:
You can claim the full write-off in the purchase year, even if the asset hasn’t been fully paid off.
Interest paid on the loan is claimed separately as a business expense, it’s not included in the asset’s cost.
You can talk to your accountant to clarify GST treatment and ensure you’re not double-counting deductions.
The future of the instant asset write-off
This tax break isn’t permanent.
- Rules, thresholds & eligibility change regularly
- Often updated in the federal budget
- Can impact your deductions year to year
How can Sleek help?
Not sure if your asset qualifies or how much you can claim?
Sleek’s expert accountants take the guesswork out of the instant asset write-off, so you claim confidently, stay compliant, and keep your cash flow healthy.
Schedule a consultation today and get tailored advice that works for your business.
Conclusion
The instant asset write-off is more than just a tax perk, it’s a smart way for eligible Australian businesses to reduce taxable income, improve cash flow, and reinvest in growth. Whether you’re upgrading tools, purchasing office equipment, or investing in tech, the scheme offers immediate financial relief when used strategically.
That said, it’s not a one-size-fits-all solution. You’ll need to consider your business structure, the asset’s cost and purpose, private use percentage, and any exclusions like the car limit. Staying on top of record-keeping and understanding how this scheme interacts with other depreciation rules is key to getting it right.
Finally, tax rules can change, and they often do. Always check the latest ATO guidelines or speak with a qualified tax professional to ensure your claims are compliant and optimised.
Used correctly, the instant asset write-off can be a powerful lever to strengthen your financial position and scale with confidence.
FAQs on instant asset write-off
Yes. If you previously claimed an immediate deduction for an asset under the simplified depreciation rules, you can also immediately deduct the first improvement cost (second element) incurred between 1 July 2024 and 30 June 2025, provided the improvement cost is less than $20,000.
General vs. Simplified Depreciation
- Businesses not using simplified depreciation must fall back on the general depreciation rules for assets above the write-off threshold. This means calculating decline in value based on effective life, using either:
- Prime cost method (straight-line depreciation)
- Diminishing value method (accelerated depreciation)
- Small businesses using simplified depreciation:
- Assets below the threshold can be written off immediately.
- Assets at or above the threshold are added to the small business pool, depreciated at:
- 15% in the first year
- 30% in subsequent years
If the entire pool balance falls below the threshold at year-end, that too can be written off.
Only if they’re off-the-shelf or commercially licensed and used for business. Custom-built or internally developed software often falls under different depreciation rules. If in doubt, you can always check with a CPA before claiming to avoid compliance issues.
General vs. Simplified Depreciation
- Businesses not using simplified depreciation must fall back on the general depreciation rules for assets above the write-off threshold. This means calculating decline in value based on effective life, using either:
- Prime cost method (straight-line depreciation)
- Diminishing value method (accelerated depreciation)
- Small businesses using simplified depreciation:
- Assets below the threshold can be written off immediately.
- Assets at or above the threshold are added to the small business pool, depreciated at:
- 15% in the first year
- 30% in subsequent years
If the entire pool balance falls below the threshold at year-end, that too can be written off.
For the 2024–25 income year, the car limit is $69,674. If you purchase a passenger vehicle costing more than this limit, your depreciation claim is capped at the business-use portion of the car limit. Even if the vehicle’s cost is below $20,000, the car limit may restrict the deductible amount.
If an asset’s cost is $20,000 or more, it doesn’t qualify for immediate deduction under IAWO. Instead, you must allocate it to the small business depreciation pool and depreciate it at 15% in the first year and 30% in subsequent years.
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