For a small business, purchasing new equipment can be a significant expense. But the tax treatment may make that investment easier to manage. The $20,000 instant asset write-off allows eligible Australian small businesses to claim an immediate deduction for qualifying depreciating assets. For the 2026-27 income year, the measure is set to provide greater certainty by becoming a permanent tax arrangement from 1 July 2026.
The eligibility for these asset write-off benefits is not just determined by the asset’s price. Business owners also need to consider their aggregated turnover and the type of asset.
This blog explores how the instant asset write-off Australia framework operates, eligibility, which assets can be included and how the threshold applies to multiple assets.
The instant asset write-off refers to a tax concession for eligible small businesses. It allows them to immediately deduct the cost of depreciating assets in the income year from the business’s assessable income. Under the permanent provisions for the instant asset write-off 2026–27, the Australian Government established the deduction cap of $20,000 for each individual asset from 1 July 2026. This measure is intended to simplify tax obligations and support better cash flow for businesses.
When evaluating instant asset write-off eligibility, small businesses with aggregated annual turnover less than $10 million can qualify to claim the deduction. The Australian Taxation Office (ATO) identifies the following four factors when determining whether the business can claim this tax concession:
The purchase date can also affect which write-off rules apply. Consulting an experienced business setup consultant can help evaluate complex corporate group structures.
The immediate tax write-off can apply to various eligible business assets that businesses purchase and use for income-producing activities. The following types of assets may qualify for an immediate deduction:
Certain assets are excluded from the small business instant asset write-off. Others have specific tax treatment that businesses need to consider before claiming the write-off. The main exclusions are:
Before you file a claim for an instant asset write-off, it is worth checking that the particular purchase meets all regulatory requirements. Using professional accounting services ensures asset purchases satisfy ATO depreciation compliance.
In practice, focus on these points:
The $20,000 threshold is only one part of the calculation. You should also check how the asset is used, when it is ready for use and how its cost is calculated for tax purposes.
When planning your overall small business tax deductions, some main factors to consider while lodging your tax returns are as follows:
If you are registered for GST and can claim the full GST credit, the GST component is excluded when calculating the asset’s cost. If you cannot claim the full credit, only the claimable GST portion is excluded. If you are not registered for GST, the GST remains part of the cost. Engaging reliable bookkeeping services in Perth can help you ensure your input tax credits are properly reconciled prior to claiming.
The asset must be first used, or installed ready for use, for a taxable purpose in the relevant income year. Simply ordering or paying for it is not enough. For example, if you pay for a $12,000 piece of equipment in June 2027 but it is not delivered and installed until July 2027, it would generally be considered ready for use in the 2027–28 income year, not 2026–27.
If you are acquiring capital equipment while launching a new enterprise, utilising a comprehensive business setup service can help coordinate acquisition dates with your operational schedule.
As per the instant asset write-off rules, only the business portion can be deducted, although the entire asset cost must first meet the threshold. Suppose a small business buys a $10,000 printer and its records show that 8,000 of 10,000 pages printed during the relevant period were for business purposes, 80% of the printer’s use is attributable to the business.
The business would generally claim the business-use portion of the cost, subject to the applicable tax rules. Having bookkeeping services for small businesses can calculate better for assets that are used for your work and personal spaces.
If you use the logbook method for a car, a representative 12-week logbook is required. For instance, if your logbook shows that 70% of your car trips are for business purposes, that percentage can be used to work out the business-use portion of eligible car expenses and depreciation.
If your enterprise operates in the southern suburbs, consulting a dedicated tax return service for small business in Bentley ensures your vehicle logbooks and depreciation schedules satisfy ATO standards.
Once the asset qualifies, the deduction is claimed when you lodge the tax return for the income year in which the asset was first used, or installed ready for use, for a taxable purpose. Businesses using tax return services in Perth claim these immediate capital write-offs with better compliance to ATO.
The common process to file your tax returns and get instant asset write-off claims is as follows:
The deduction reduces the business’s taxable income for that income year. It is not a separate payment from the ATO.
Also read: Small Business CGT Concessions in Australia
The $20,000 instant asset write-off can help eligible small businesses bring forward deductions for qualifying asset purchases in the 2026–27 income year. However, the benefit depends on more than the asset’s price. You need to consider your aggregated turnover, the asset’s eligibility, business use and when you first use or install it, ready for use. Before claiming, check the ATO’s current requirements or speak with a registered tax agent to ensure you report the deduction correctly.
Eligible Australian small businesses with aggregated annual turnover below $10 million may be able to use the instant asset write-off if they meet the applicable simplified depreciation requirements. The asset must also meet the relevant cost, timing and business-use conditions.
Yes. The $20,000 threshold is generally considered on an individual-asset basis. An eligible business may therefore claim immediate deductions for more than one qualifying asset, provided each asset meets the relevant requirements.
An asset that meets or exceeds the applicable $20,000 threshold generally cannot be claimed immediately under the instant asset write-off. Depending on the circumstances, it may instead be dealt with under the small business depreciation rules.
A second-hand depreciating asset may qualify where the business meets the eligibility requirements and the asset is otherwise eligible. The asset’s cost, business use and when it is first used or installed ready for use should all be considered.
You generally can only claim the portion of an eligible asset that relates to a taxable or business purpose. Appropriate records should be kept to support how the business-use percentage was calculated.
The timing of the deduction generally depends on when the asset is first used, or installed ready for use, for a taxable purpose. Buying or paying for an asset alone does not necessarily mean the deduction belongs in that same income year.
Some business vehicles may qualify, but additional tax rules can affect the amount that can be claimed. Passenger vehicles can be subject to specific depreciation and car-limit rules, so the vehicle’s type and business use need to be considered.
Yes. The way GST is treated when determining an asset’s cost can depend on whether the business is registered for GST and the amount of GST credit it can claim. Businesses should calculate the relevant asset cost using their particular GST circumstances.
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