The instant asset write-off is one of the most powerful tax deductions available to Australian small businesses — and one of the most misunderstood. It lets you claim the full cost of eligible business assets in the year you buy them, rather than depreciating them over several years. For the 2025-26 financial year, the threshold is $20,000 per asset. This guide explains exactly what qualifies, how to claim it, and the mistakes that can cost you the deduction.
How the Instant Asset Write-Off Works in 2025-26
The instant asset write-off allows eligible small businesses to immediately deduct the cost of each asset that costs less than the threshold amount. For 2025-26, the rules are:
| Detail | 2025-26 Rule |
|---|---|
| Threshold (per asset) | $20,000 (exclusive of GST if registered) |
| Turnover limit | Aggregated turnover under $10 million |
| Number of assets | No limit — claim as many as you like |
| Asset must be | First used or installed ready for use by 30 June 2026 |
| Eligible entities | Sole traders, companies, partnerships, trusts |
| Assets $20,000+ | Added to simplified depreciation pool (15%/30%) |
The threshold is per asset, not a total cap. If you buy five items at $18,000 each, you can claim all five — that is $90,000 in immediate deductions.
What Assets Qualify?
Any new or second-hand asset used primarily for business purposes can qualify. Common examples include:
- Vehicles — utes, vans, trucks (subject to the car cost limit of $69,674 for passenger vehicles)
- Tools and equipment — power tools, hand tools, safety equipment
- Technology — computers, laptops, tablets, software, phones
- Office furniture — desks, chairs, filing cabinets, shelving
- Machinery — any business-use machinery under the threshold
- Trailers and attachments — if used for business
- Signage and fit-out — business signage, shop fit-outs, storage systems
The asset does not need to be new. Second-hand assets qualify just as well as brand new ones. The key requirement is that it must be used in your business — purely personal assets are not deductible.
The “First Used or Installed Ready for Use” Rule
This is where most businesses trip up. The instant asset write-off is not triggered by when you order or pay for the asset — it is triggered by when the asset is first used or installed ready for use.
What this means in practice:
- An item ordered in June but delivered in July — not eligible for the 2025-26 write-off
- An item delivered and sitting in your warehouse unused — eligible, because it is installed ready for use
- An item paid for in full but still being custom-built overseas — not eligible until it arrives and is ready to use
If you are planning EOFY purchases, allow adequate lead time. For equipment that needs to be ordered or imported, you may need to act in April or May to ensure delivery before 30 June. Check our EOFY checklist for a timeline of key dates.
How to Claim the Instant Asset Write-Off
Claiming is straightforward if your records are in order:
- Purchase the asset and ensure it is first used or installed ready for use before 30 June 2026.
- Keep the receipt or tax invoice. For GST-registered businesses, you need a valid tax invoice showing GST separately.
- Record it in your accounting software as an asset purchase (not an expense) and apply the instant write-off depreciation method.
- Claim the deduction on your tax return under the small business entity simplified depreciation rules.
- If the asset is used partly for personal purposes, only claim the business-use percentage. Keep a logbook or similar record to support the apportionment.
Instant Asset Write-Off and Equipment Finance
You do not need to pay cash to claim the write-off. If you finance the asset, the type of finance determines whether you can claim the instant deduction:
| Finance Type | Can You Claim IAWO? | Why |
|---|---|---|
| Chattel mortgage | Yes | You own the asset from day one |
| Commercial hire purchase | Yes | You own the asset from day one |
| Finance lease | No | The financier owns the asset — you deduct lease payments instead |
| Operating lease / rental | No | The financier owns the asset — you deduct rental payments instead |
This is a critical distinction. With a chattel mortgage on a $19,000 asset, you claim the full $19,000 as an immediate deduction — even though you might only have paid a $2,000 deposit. For more on equipment finance options, see our equipment finance guide or use our equipment finance calculator.
Common Mistakes That Cost You the Deduction
- Ordering too late. If the asset is not delivered and ready to use by 30 June, the deduction pushes into the next financial year. Order early.
- Exceeding the threshold. An asset costing $20,001 does not qualify for instant write-off. It goes into the depreciation pool instead. Consider whether you can split a purchase into separate components that each fall under $20,000.
- Forgetting the car limit. Passenger vehicles (cars, SUVs) have a depreciation limit of $69,674 regardless of purchase price. A $90,000 ute that is classified as a “car” can only be depreciated on $69,674. Vehicles over one tonne carrying capacity may be exempt from this limit.
- Not apportioning personal use. If you use the asset 60% for business and 40% personal, you can only claim 60% of the cost. The ATO will check this, especially for vehicles and technology.
- Using the wrong finance product. A finance lease does not allow the write-off. Make sure your finance broker sets up the right structure before settlement.
- Aggregated turnover over $10 million. If your combined turnover (including connected entities) exceeds $10 million, you do not qualify. Check with your accountant if you have multiple entities.
Assets Over $20,000: The Depreciation Pool
If an asset costs $20,000 or more, it is not a lost cause — it just gets depreciated over time. Under the small business simplified depreciation rules, assets costing $20,000+ go into a general pool and are depreciated at:
- 15% in the first year (half the standard rate because the asset is assumed to be purchased mid-year)
- 30% in each subsequent year (on the remaining balance)
For example, a $50,000 piece of equipment would generate a $7,500 deduction in year one (15%), then $12,750 in year two (30% of $42,500), and so on. It takes about seven years to depreciate 80% of the value.
Should You Buy Before 30 June?
The instant asset write-off should never be the reason you buy something. A $19,000 purchase saves you $4,750 in tax (at the 25% company rate) — which means it still costs you $14,250 after tax. Only buy assets you genuinely need for your business.
That said, if you were already planning to buy equipment in July or August, bringing the purchase forward to June makes sense. You get the tax deduction 12 months earlier, which improves your cash flow position.
We work primarily with trade businesses including arborists, landscapers, and construction operators — industries where equipment is a major capital expense. If you are planning a significant equipment purchase, talk to your accountant before committing. The right timing and finance structure can save thousands. Book a free consultation with George Morice to discuss your options, or call 02 8378 2421.
Frequently Asked Questions
What is the instant asset write-off limit for 2025-26?
The instant asset write-off threshold for the 2025-26 financial year is $20,000 per asset for businesses with aggregated turnover under $10 million. This means each individual asset costing less than $20,000 (exclusive of GST if registered for GST) can be fully deducted in the year it is first used or installed ready for use. There is no limit on the number of assets you can claim.
Can I claim the instant asset write-off on a financed asset?
Yes. If you finance an asset using a chattel mortgage or commercial hire purchase, you claim the instant asset write-off on the full purchase price of the asset, not just the deposit. This is because you own the asset from day one under these finance structures. With a lease or rental agreement, you cannot claim the write-off because you do not own the asset — instead, the lease payments are deductible as an operating expense.
Does the asset need to be delivered by 30 June to claim the write-off?
The asset must be first used or installed ready for use by 30 June 2026, not just ordered or paid for. If you order equipment in June but it does not arrive until July, you cannot claim the write-off in the 2025-26 year. For this reason, plan major purchases early enough to allow for delivery lead times, especially for imported or custom equipment.
What happens to assets that cost more than $20,000?
Assets costing $20,000 or more cannot be instantly written off. Instead, they are added to the small business simplified depreciation pool, where they are depreciated at 15% in the first year and 30% in each subsequent year. This means you still get a deduction — it is just spread over multiple years rather than claimed in full upfront.
Can sole traders claim the instant asset write-off?
Yes. The instant asset write-off is available to all small business entities with aggregated turnover under $10 million, including sole traders, partnerships, companies, and trusts. Sole traders claim it on their individual tax return as a business deduction. The same $20,000 threshold and first-use requirement applies regardless of entity type.
