Equipment finance tax benefits: write-off, GST and depreciation

The instant asset write-off: $20,000, now permanent

Eligible businesses can immediately deduct the business portion of individual depreciating assets costing less than $20,000 (GST exclusive for GST-registered businesses) in the year the asset is first used or installed ready for use. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026, which received assent on 26 August 2026, made the threshold permanent for businesses with aggregated turnover under $10 million, applying to assets first used or installed ready for use from 1 July 2026.

There is no 50 per cent business-use test: you deduct only the business portion, but the whole cost of the asset must still be under $20,000. New and second-hand assets both qualify, and with a trade-in the cost is the price before the trade-in credit.

Assets that cost $20,000 or more

They go into the small business pool, which depreciates at 15% in the first year and 30% each year after that. If the pool's balance at the end of an income year is under $20,000, you can write off the whole balance, and the rule that locks a business out of simplified depreciation for five years after it opts out stays suspended until 30 June 2027.

One asset or several?

The $20,000 limit is tested asset by asset, and the ATO treats as one asset whatever functions as a single unit. If a purchase genuinely covers separate assets that can each work on their own, such as a laptop and a printer, each one is tested separately; ask the supplier for an itemised invoice so this is clear to your accountant. A single asset cannot be broken into parts, or billed across several invoices, to bring it under the limit.

Cars

Passenger cars also run into the car limit, $69,883 for 2026-27, which caps the cost you can depreciate, and the ATO's own worked example has an $80,000 car going into the pool, not the write-off. Most new utes and vans cost well over $20,000 anyway, so the write-off is really a tools, fit-out, IT and second-hand equipment measure.

Tax benefits by finance structure

Under a chattel mortgage you own the equipment from day one, so the GST, the depreciation and any write-off are yours from the start, and the interest is deductible. A hire purchase now lands in the same place: the ATO lets a GST-registered hirer claim the full GST credit up front on agreements made since 1 July 2012, and treats the agreement as a notional sale and loan, so the hirer depreciates the asset and deducts the notional interest.

Under a finance lease or operating lease the lessor owns the equipment. The rentals are deductible, the GST is claimed on each rental, and there is no depreciation or write-off on your side. If you buy the equipment at the end, that purchase is a separate transaction, and the ATO says you may be able to claim the GST in its price.

A worked example

A GST-registered business buys a $55,000 machine, including $5,000 GST, on a five-year chattel mortgage at an illustrative 10% p.a., and uses it wholly for the business.

• GST: $5,000 claimed on the next BAS.
• Repayments: about $1,169 a month, with about $5,098 of interest in the first year, which is deductible.
• Depreciation: the cost excluding GST, $50,000, is over the write-off threshold, so it goes into the small business pool: $7,500 in the first year (15%) and $12,750 in the second (30% of the remaining $42,500).

Had the machine cost $19,000 excluding GST, the whole $19,000 would be deductible in the year it was first used, while the finance spreads the cash cost. The write-off brings a deduction forward; it does not create one, and a company paying the 25 per cent base rate that spends $19,000 on an asset saves $4,750 in tax, not $19,000.

End-of-financial-year planning

To claim a deduction in the current year, the equipment must be first used or installed ready for use by 30 June; ordering, paying for or taking delivery of it is not enough. Allow time for delivery, installation and commissioning. With the write-off now permanent, an asset that goes live on 3 July instead of 28 June moves the deduction one year rather than losing it, so buy when the business needs the asset.

Getting finance approved before you order means settlement is not what delays the asset past 30 June. A broker can arrange pre-approval with the lender that suits the purchase.

This is general information, not tax advice. Confirm how these rules apply to your business with your accountant or the ATO before you buy an asset or choose a structure.