Parliament has passed the extension of the $20k instant asset write-off threshold until 30 June 2026. On 1 July 2026, the threshold returns to $1,000 (unless the Government extends the increase).
The instant asset write-off enables eligible small businesses to claim an immediate tax deduction for certain depreciating assets costing less than $20k in the year of purchase (instead of depreciating the asset over a number of years – a cashflow benefit for the business).
Announced in May 2025 for 2025-26, the continuation of the increased 2023-24 and 2024-25 $20k threshold finally passed Parliament at the end of November 2025.
For an initiative designed to encourage investment by small business, it’s discouraging that the $20k threshold (or higher) is not made permanent. Instead, each year business operators need to wait and see if the Government will continue the keep the threshold higher than the $1,000 legislated in the Income Tax Assessment Act (on a temporary basis the instant asset write-off threshold has been at least $20k since 2016). A number of tax, accounting and small business organisations have called for the increased threshold to be increased, made permanent and indexed.
Remember that the deduction is not a refund, it will only reduce the taxable income of the business entity, or in some cases, it will create or increase a tax loss that needs to be carried forward to future years. For example, if your business operates through a company structure, the economic benefit of the write-off is limited to the relevant company tax rate (25% for base rate entities, 30% for other companies). If your business is likely to make a tax loss for the year, then a larger deduction might not provide any short-term benefit.
Eligibility to access the instant asset write-off looks at both your business entity and the asset.
To utilise the instant asset write-off, your business entity must:
And, for an asset to be eligible, it must:
A small business entity can also claim an immediate deduction for additional costs incurred after an asset was acquired, for example, costs on improving the asset, if the amount is less than $20,000 and it is the first addition after the original asset was written off in a previous income year.
The provisions that prevent small business entities from re-entering the simplified depreciation regime for five years if they opt-out will continue to be suspended until 30 June 2026 (the lock-out rules).
If your business is a small business entity and chooses to apply the simplified depreciation rules, then assets costing $20,000 or more (that cannot be immediately deducted) can continue to be placed into the small business general pool and depreciated at 15% in the first income year and 30% each income year thereafter.
The increased instant asset write-off threshold also means that a $20,000 threshold applies for the purpose of determining whether the full pool balance is written off in 2025-26. Just remember that when you are applying these rules, you don’t look at the closing pool balance, you are looking at what the pool balance would have been if you ignored the current year depreciation deductions for the pool for 2025-26.
The write-off threshold applies per asset, so a small business entity can potentially deduct the full cost of multiple assets. Assuming all the other conditions are met, an immediate deduction should be available for each individual item costing less than $20,000 - just be careful of cashflow.
The instant asset write-off does not distinguish between new or second-hand goods. For example, second hand machinery may qualify if it meets the other requirements.
Concerned whether your business or an asset you are considering purchasing qualifies for the instant asset write off, or want to better understand how to streamline your business operation? Talk to Stephen Maze about how Hayes Knight can assist your business run smoothly, efficiently and effectively.
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