For a decade the instant asset write-off has been extended one Budget at a time, which made planning a purchase feel like betting on Parliament. That ended this year: the $20,000 limit is now permanent from 01-07-2026. The rule itself is simple, but the edges — vehicles, part-business use, the $20,000 line, and what happens to assets above it — are where claims go wrong.
What changed from 1 July 2026
In the 2026–27 Budget on 12-05-2026 the Government announced the $20,000 instant asset write-off would become permanent for small businesses from 01-07-2026, and the ATO confirms the measure is now law under the Treasury Laws Amendment (Tax Reform No. 2) Act 2026. The previous year, 2025–26, was covered by a separate one-year extension. In practice the threshold has not moved since 01-07-2023 — what has changed is that you no longer need to wait for an extension bill before you can rely on it.
The suspension of the five-year "lock-out" rule — which used to stop a business re-entering simplified depreciation after opting out — continues until 30-06-2027.
Who is eligible
- Aggregated turnover under $10 million. That means your business's annual turnover plus the turnover of any entities connected with you or that are your affiliates. A family with two companies and a trust counts them together.
- You use the simplified depreciation rules. The write-off is one component of those rules; the other is the small business pool. You can't pick the write-off and ignore the pool — if you choose simplified depreciation you apply the whole set to all your depreciating assets, apart from a small list of excluded assets.
- The asset costs less than $20,000. The full cost, before working out the business-use percentage, and before any trade-in credit is applied.
- It is first used, or installed ready for use, in the income year you claim. The order date and the invoice date don't matter; delivery and readiness do.
Sole traders, partnerships, companies and trusts can all qualify. Assets used in research and development activities are the main carve-out: they fall under the general depreciation rules instead.
Working out the cost and the deduction
If you are registered for GST and can claim the full credit, the asset's cost for the $20,000 test excludes GST. A $21,500 machine with $1,955 of GST has a cost of $19,545 — under the limit. If you aren't registered, GST is part of the cost, and the same machine is over the limit.
Two assets, two tests: a $6,800 laptop used 80% for business and a $700 printer used solely for business are each tested on their full cost, and the deduction is $5,440 plus $700. The private-use portion is never deductible, but it is still counted when you check the asset against the limit.
If you wrote an asset off in an earlier year and later spend on an improvement to it, the first such cost addition can also be deducted immediately provided it is under $20,000. Later additions to the same asset go into the pool.
Vehicles and the car limit
This is the most common misunderstanding. A $40,000 ute used 40% for business is not eligible for the write-off — the test is the $40,000 cost, not the $16,000 business portion. The $16,000 goes into the small business pool instead.
Passenger cars face a second cap. For vehicles designed to carry fewer than nine passengers and a load under one tonne, the car limit ($69,674 for 2025–26, indexed each year) is the maximum cost you can depreciate under any method, and the GST credit on the purchase is similarly capped at one-eleventh of the limit. A $75,000 car bought by a GST-registered business is therefore added to the pool at $68,666, and the excess is never claimable. Utes and vans with a payload of one tonne or more are outside the car limit, which is one reason tradies' vehicles are treated more generously — see our tradies' deductions guide.
Assets of $20,000 or more: the small business pool
Anything that doesn't fit under the limit joins the pool at its business-use portion. You claim 15% of that amount in the first year, regardless of whether you bought it in July or June, then 30% of the pool's opening balance each year after. When the pool balance falls below $20,000 at the end of a year, the whole balance is written off. Proceeds from assets you sell come out of the pool.
The pool isn't a consolation prize. Over three years a $50,000 asset returns roughly 58% of its cost as deductions, and the pool keeps compounding on everything in it.
Timing before 30 June
The deduction lands in the year the asset is first used or installed ready for use. A machine ordered and paid for on 28 June but delivered in July is a 2027–28 deduction, not a 2026–27 one. If a purchase is part of your year-end planning, confirm delivery and installation dates with the supplier before you commit. Equally, an asset installed on 2 July is still deductible — just a year later.
A deduction is not a saving
A $19,000 purchase does not save you $19,000 in tax. For a company on the 25% small business rate it reduces tax by $4,750; for a sole trader on a 30% marginal rate, $5,700. The other $13,000-plus leaves your bank account for good. The write-off changes when you claim depreciation, not whether the asset was worth buying. If you need the asset, buying it before 30 June brings the deduction forward and that is genuinely useful. If you don't need it, you have spent real money to reduce a tax bill by a fraction of the outlay — and you have the asset to store, insure and eventually sell.
The better question for June is whether the purchase would make sense in August at the same price. If yes, the timing is a bonus. If no, the tax tail is wagging the dog.
Records
Keep the invoice, evidence of the delivery or installation date, your calculation of the business-use percentage, and — for pooled assets — how you worked out the opening pool balance. Record any change in business use and any disposal. The ATO expects these records to be kept for five years.
What SMT does
We check your aggregated turnover before you rely on the concession, confirm whether each asset sits under or over the line, run the GST and car-limit calculations, and set up the pool correctly in your software so it rolls forward year to year. For sole traders and companies alike, this sits inside our tax planning conversation before 30 June, where the purchase decision is weighed against cash flow rather than the deduction alone.
Sources
- ATO — Instant asset write-off for eligible businesses
- ATO — $20,000 Instant Asset Write-off (new legislation)
- ATO — Simpler depreciation rules for small business
- ATO — Assets and exclusions (including the car limit)
- ATO — Small business pool calculations
Frequently asked
What is the instant asset write off 2026?
An immediate deduction for the business portion of a depreciating asset that costs less than $20,000, claimed in the year the asset is first used or installed ready for use. It is available to small businesses with aggregated turnover under $10 million that use the simplified depreciation rules. The $20,000 limit was made permanent from 1 July 2026.
Can a sole trader use the instant asset write off?
Yes. The concession is based on the business, not its structure. A sole trader with aggregated turnover under $10 million who uses the simplified depreciation rules claims the business-use portion of each eligible asset in the Business and professional items schedule of their individual return.
Can I use the instant asset write off for a vehicle?
Only if the vehicle's full cost is less than $20,000. Most vehicles cost more, so the business-use portion goes into the small business pool instead (15% in the first year, 30% each year after). For passenger cars carrying fewer than nine passengers and under one tonne, the car limit also caps the cost you can depreciate — $69,674 for 2025–26.
What is the instant asset write off threshold 2026-27?
$20,000 per asset, exclusive of GST if you are registered and can claim the full credit. The limit applies to each asset separately, so several assets each under $20,000 can all be written off in the same year. An asset costing $20,000 or more is pooled.
What are the instant asset write off eligibility rules?
Aggregated turnover under $10 million (your turnover plus that of connected entities and affiliates); you must apply the simplified depreciation rules to all your depreciating assets; the asset must cost less than $20,000; and it must be first used or installed ready for use for a taxable purpose in the income year you claim. New and second-hand assets both qualify. A small number of assets are excluded from the simplified rules.
Is the $20,000 instant asset write off permanent now?
Yes. The ATO's new legislation page confirms that the 12 May 2026 Budget measure making the $20,000 limit permanent from 1 July 2026 has passed into law. Earlier years relied on year-by-year extensions.