Instant Asset Write-Off 2026: What Small Businesses Need to Know

The instant asset write-off remains one of the most valuable tax deductions available to Australian small businesses in 2026. It allows eligible businesses to immediately deduct the full cost of qualifying assets in the year they are first used or installed ready for use, rather than depreciating them over multiple years. For businesses planning capital expenditure, understanding the current rules and thresholds is essential to maximising your tax benefit.

Current Thresholds for 2025-26

For the 2025-26 financial year, the instant asset write-off threshold is $20,000 per asset for businesses with an aggregated turnover of less than $10 million. This means any eligible asset costing less than $20,000 (exclusive of GST if you are registered for GST) can be fully deducted in the income year it is first used or installed ready for use. It is important to note that this threshold applies per asset, not in total. A business could purchase five assets each costing $19,999 and claim an immediate deduction of $99,995 in total. Each asset is assessed independently against the threshold. For assets costing $20,000 or more, businesses can use the simplified depreciation pool. Assets over the threshold are placed in a general small business pool and depreciated at 15 per cent in the first year and 30 per cent each year thereafter.

Who Is Eligible?

To use the instant asset write-off, your business must have an aggregated annual turnover of less than $10 million. Aggregated turnover includes the turnover of your business plus the turnover of any connected or affiliated entities. Most small businesses, including sole traders, partnerships, trusts, and companies, are eligible provided they meet the turnover test. The asset must be used, or installed ready for use, in the relevant income year. Simply ordering or paying for an asset is not sufficient — it must be available for use in the business before 30 June to claim the deduction in that financial year.

What Assets Qualify?

Almost any tangible asset used for business purposes can qualify for the instant asset write-off. Common examples include: Motor vehicles (subject to the car limit, currently $69,674 for the 2025-26 financial year), which means the maximum deduction for a passenger vehicle is capped at this amount regardless of the actual purchase price. Commercial vehicles such as utes, vans, and trucks that are not subject to the car limit (because they are not classified as cars under tax law) can be deducted at their full cost provided they are under the $20,000 threshold, or depreciated through the pool if over that amount. Equipment and machinery, including construction equipment, manufacturing tools, commercial kitchen equipment, IT equipment, office furniture, and point-of-sale systems. Technology assets such as computers, servers, software, and digital tools used in the business. Fit-out and improvements to business premises (though some items may be classified as capital works and follow different rules).

The Car Limit Explained

If you are purchasing a car (defined under tax law as a vehicle designed to carry fewer than nine passengers and a load of less than one tonne), the instant asset write-off is capped at the car depreciation limit, which is $69,674 for 2025-26. This means even if the car costs $80,000, the maximum you can deduct is $69,674. However, this limit does not apply to vehicles that are not classified as cars under tax law. This includes most commercial vehicles such as utes with a payload of one tonne or more, vans designed for commercial use, trucks, and vehicles with more than eight passenger seats. For these vehicles, the full cost can be claimed (subject to the $20,000 per-asset threshold or depreciation pool rules). This distinction is particularly relevant for tradespeople and business owners who use commercial vehicles. A $45,000 Toyota HiLux used in a building business, for example, is not subject to the car limit because it has a payload exceeding one tonne, so the full cost can be claimed if it falls under the instant asset write-off threshold.

How to Claim

To claim the instant asset write-off, the process is straightforward. The deduction is claimed in your business tax return (either as a sole trader on your individual tax return, or in the company, trust, or partnership tax return). You need to record the asset in your depreciation schedule as an immediately deductible item. Important documentation to maintain includes the tax invoice or receipt for the asset, evidence of the date the asset was first used or installed ready for use, and records showing the business use percentage if the asset is used partly for private purposes. If an asset is used partly for private purposes, you can only claim the business-use portion. For GST-registered businesses, the instant asset write-off applies to the GST-exclusive amount. For non-GST-registered businesses, it applies to the GST-inclusive amount.

Interaction with Finance

A common misconception is that you need to purchase an asset outright to claim the instant asset write-off. In fact, you can claim the deduction regardless of how the asset is financed, as long as you are the owner for tax purposes. This means assets purchased using a chattel mortgage, commercial hire purchase, or business loan all qualify. Under a chattel mortgage, the borrower owns the asset from day one, which means the instant asset write-off can be claimed in the year the asset is first used. This makes chattel mortgages particularly popular for businesses looking to finance equipment while maximising the tax benefit. Under a hire purchase arrangement, the tax treatment can vary depending on the specific structure, but generally the hirer is treated as the owner for depreciation purposes and can claim the write-off. Leasing arrangements (operating leases and finance leases) are treated differently. Under a lease, the lessor typically retains ownership, so the lessee claims the lease payments as a deduction instead of claiming depreciation. The instant asset write-off does not apply to leased assets.

Temporary Full Expensing vs Current Rules

It is important to distinguish the current $20,000 instant asset write-off from the temporary full expensing provisions that were in place from October 2020 to June 2023. Temporary full expensing allowed businesses to deduct the full cost of eligible assets with no threshold cap. That measure has ended, and the $20,000 per-asset limit now applies. Some business owners who became accustomed to the unlimited write-off may be surprised by the current cap. However, the $20,000 threshold still provides a meaningful benefit for most routine capital purchases.

Strategic Considerations

If you are planning significant capital expenditure, timing is key. Assets must be used or installed ready for use before 30 June 2026 to be claimed in the 2025-26 financial year. Ordering early to avoid delivery delays is advisable, particularly for specialised equipment or popular vehicle models. If you are purchasing multiple assets, each one is assessed independently. Buying five items at $18,000 each gives you $90,000 in immediate deductions, whereas buying one item at $90,000 only qualifies for pool depreciation. We recommend consulting your accountant to confirm the optimal timing and structure for your purchases, and speaking with a finance broker to arrange competitive funding if needed.