$20,000 Instant Asset Write-Off

Who's eligible, what you can claim, and the common mistakes that cost small businesses the deduction.

If you run a small business in Australia, you've probably heard people throwing around the phrase "$20,000 instant asset write-off" at tax time. It sounds great, but if you're not a tax professional, the ATO's wording can be confusing fast. This guide breaks it down simply: what it actually means, who can use it, and how to claim it without making a costly mistake.

What is the instant asset write-off, really?

Normally, when your business buys something expensive (a laptop, a van, a coffee machine for the shop), you can't just deduct the full cost in one go. The ATO usually makes you spread that deduction out over several years through depreciation: claiming a bit of the cost each year as the item loses value.

The instant asset write-off flips that around. Instead of waiting years to claim the full amount, eligible small businesses can deduct the entire cost of an eligible asset in the same year they buy and start using it, as long as it costs less than $20,000.

Buy it. Start using it. Claim the whole thing on this year's tax return.

How much can you claim, and until when?

For the 2025–26 income year (1 July 2025 to 30 June 2026), the threshold is $20,000, and the limit applies on a per-asset basis. That means a business can instantly write off multiple assets as long as each one is under that amount.

A few important details the ATO is specific about:

The asset must have been first used, or installed and ready for use, for a taxable (business) purpose between 1 July 2025 and 30 June 2026.
If you're registered for GST, the $20,000 threshold is based on the GST-exclusive price. If you're not registered for GST, the threshold includes GST.
The $20,000 threshold was extended by the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025, which set the limit for 1 July 2025 to 30 June 2026.

Heads up for next year: the threshold is only locked in until 30 June 2026. After that, it's scheduled to drop back down unless the government extends it. Always check the ATO website before making big decisions based on next year's rules.

Who's actually eligible?

Turnover under $10 million. This is your business's aggregated turnover: your annual income combined with any connected or affiliated businesses.
You use the simplified depreciation rules. This is a specific election the ATO requires. You must use them for all depreciating assets (except those specifically excluded), apply the entire set of rules rather than picking and choosing, and only claim the business-use portion of each asset.
Any business structure works. Sole traders, partnerships, companies and trusts can all access it, as long as they meet the turnover and depreciation rule requirements.

What can you actually buy?

A wide range of business assets qualify, including tools and trade equipment, computers and laptops, office furniture, eligible vehicles (subject to a separate car limit, covered below) and items like coffee machines for a café. Both new and second-hand assets are eligible.

What doesn't qualify

Assets that are leased out to someone else
Capital works like building renovations or structural improvements (these have their own depreciation rules)
Assets not ready for use by 30 June. Ordering something on 25 June that doesn't arrive or get installed until July means you claim it in the next financial year.

The ATO doesn't care when you paid. It cares when the asset was first used or installed ready for use, so order early if you're relying on a 30 June deadline.

What if the asset costs $20,000 or more?

If something costs $20,000 or more, you can't instantly write it off. Instead, it goes into the general small business pool and is depreciated at 15% in the first income year and 30% in each year after that. You still get the deduction; it's just spread out over time.

Vehicles: the car limit catch

Cars get special treatment. There's a separate cap called the car limit, which for 2025–26 is $69,674. This matters because:

If a passenger vehicle costs more than $20,000, it's excluded from the instant write-off and goes into the depreciation pool instead, capped at the car limit.
Even if you spend more than the car limit on a vehicle, you can only use the car limit amount for depreciation. The rest can't be claimed under any depreciation rule.
If you use a vehicle partly for private purposes, you can only claim the business-use percentage. For example, a business owner who buys a $40,000 ute and uses it 40% for business can't use the instant asset write-off at all, because the ute's total cost of $40,000 exceeds the $20,000 limit, even though the business portion is only $16,000.

Common trap: the eligibility test looks at the full price of the asset, not just your business-use share of it.

A simple example

Say your business buys:

A new laptop for $3,500
A second-hand work van for $18,000
A commercial coffee machine for $6,000

All three are under $20,000 each, all are used for business, and all were ready for use before 30 June 2026. You can claim the full cost of all three as an immediate deduction in your 2025–26 tax return, even though the combined total is well over $20,000. The limit applies per asset, not to your total spending.

How to claim it

Buy and start using the asset within the eligible period (1 July 2025 – 30 June 2026).
Keep your records: invoices, the purchase date, the in-use date, and notes on any private-use percentage.
Elect to use the simplified depreciation rules in your tax return for that income year.
Claim the deduction in your tax return, or have your accountant or BAS agent do it for you. This usually happens in the business and professional items section of your return.

Common mistakes to avoid

Forgetting to apportion private use. If you use something 80% for business and 20% personally, you can only claim 80% of the cost, but the eligibility threshold still applies to the full purchase price.
Missing the ready-for-use deadline. Buying something on paper before 30 June doesn't count if it isn't operational by then.
Assuming the threshold continues unchanged after June 2026. Always check the ATO's site for the year you're claiming in; this measure has changed several times in recent years.
Not electing the simplified depreciation rules. You can't access the write-off without this step.

The bottom line

The $20,000 instant asset write-off is one of the simplest and most useful tax concessions available to Australian small businesses. It turns equipment purchases into an immediate tax deduction rather than one you wait years to claim. But eligibility comes down to specific details: your turnover, the asset's full price (not just the business-use share), and exact timing.

Because rules like this change from year to year, it's worth a quick check of the ATO website or a conversation with your accountant before you commit to a big purchase.

Want to know what this means for your business?

Every business is different, and the right move depends on your turnover, your cash flow and what you're planning to buy. If you'd like to work out exactly how the instant asset write-off could apply to you, or whether it's the best option compared with other deductions, get in touch with the team at C&S Accounting Solutions.

This article is general information only and doesn't consider your personal circumstances. Talk to us before acting on it.

Ask us about your situation