Instant Asset Write-Off 2026: Complete Business Guide

The instant asset write-off is one of the most powerful tax incentives for Australian small businesses. It allows you to deduct the full cost of eligible assets in the income year you purchase and use them, rather than depreciating them over several years. This guide explains the current rules, eligibility criteria, how to claim and how the write-off interacts with other tax provisions.

Current Thresholds and Eligibility

The instant asset write-off has gone through significant changes in recent years. During COVID-19, the government introduced "temporary full expensing" which allowed businesses of almost any size to write off assets of any value. This ended on 30 June 2023.

Since then, the provisions have settled on a targeted threshold: small businesses with an aggregated annual turnover of less than $10 million can instantly write off eligible assets costing less than $20,000 each. After nearly a decade of one-year extensions, the May 2026 federal Budget announced that the $20,000 threshold would become permanent, and the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 made it law when it received assent on 26 August 2026. It applies to assets first used or installed ready for use from 1 July 2026. For the 2026-27 income year and beyond, there is no scheduled sunset clause and no reversion to a lower threshold.

What Assets Are Eligible?

Most tangible business assets are eligible, including:

• Vehicles costing less than $20,000 (dearer vehicles go into the small business pool, see below)
• Machinery and equipment (excavators, lathes, printing presses, etc.)
• Office furniture and fit-out
• Computer hardware and software
• Tools of trade
• Commercial kitchen equipment
• Medical and dental equipment
• Agricultural equipment and implements

Assets that are not eligible include:

• Assets that are leased out or expected to be leased out for more than 50% of the time
• Horticultural plants
• Software allocated to a software development pool
• Capital works (buildings, structural improvements) which are depreciated under Division 43
• Assets not used primarily for business purposes

Vehicles and the Car Limit

A vehicle is written off instantly only if it costs less than $20,000, the same test as any other asset. Most business vehicles cost more than that, and any vehicle costing $20,000 or more (excluding GST if you are registered for GST and can claim the full credit) goes into the small business pool instead, where it is deducted at 15% in the first year and 30% of the remaining balance each year after.

The car limit is a separate rule. If the vehicle is a passenger car (designed to carry fewer than 9 passengers and a load of less than one tonne), the car limit caps the cost you can depreciate, whichever method you use. For the 2026-27 income year the limit is $69,883 (the ATO indexes it each year), and any cost above it cannot be claimed under any other depreciation rule. It also caps the GST credit at one-eleventh of the limit, $6,353 for 2026-27.

So if a GST-registered business buys a $90,000 SUV (including GST) for full business use, it claims a GST credit of $6,353, and the $83,647 that remains is capped at the $69,883 car limit. That $69,883 goes into the small business pool, giving a first-year deduction of about $10,482 (15%) and about $17,820 in the second year (30% of the remaining balance). The $13,764 above the car limit is never deductible. The ATO's own worked example does the same with an $80,000 car: it goes into the pool, not the write-off.

If the vehicle is designed to carry a load of one tonne or more, as many utes, vans and trucks are (check the payload on the compliance plate, since plenty of dual cab utes fall just under), or nine or more passengers, the car limit does not apply and the full cost goes into the pool. A ute with a payload of one tonne or more that costs $75,000 including GST goes into the pool at $68,182, a first-year deduction of about $10,227. It is still not an instant write-off, because it costs more than $20,000.

How to Claim the Write-Off

1. Purchase and use the asset: The asset must be first used or installed ready for use during the income year you want to claim the deduction. Buying the asset before 30 June but not using it until July means the claim falls into the next income year.
2. Determine business use percentage: If the asset is used partly for private purposes, you can only deduct the business-use proportion. For example, a laptop used 70% for business can be written off at 70% of its cost.
3. Record it in your tax return: Claim the deduction in your business income tax return. For sole traders, this is on the business schedule. For companies, it is in the company tax return. The deduction reduces your taxable income.
4. Keep records: Retain the tax invoice, proof of payment and evidence of first use for at least five years. The ATO can audit your claim during this period.

Interaction with Depreciation

The instant asset write-off replaces the normal depreciation process for eligible assets. Instead of spreading the deduction over the asset's effective life (which might be 5, 10 or 20 years depending on the asset), you take the full deduction in year one.

If an asset costs $20,000 or more, you cannot use the write-off and must instead add the asset to the general small business depreciation pool (which depreciates at 15% in the first year and 30% in subsequent years) or depreciate it individually using the asset's effective life.

Small businesses using the simplified depreciation rules can also write off the remaining balance of their depreciation pool if it falls below $20,000 at the end of the income year. This is separate from the per-asset instant write-off but can provide additional benefit.

BAS Reporting and GST

The instant asset write-off is an income tax deduction, not a GST provision. However, the two interact:

• If you are GST-registered, claim the GST on your BAS in the period you make the purchase (regardless of when you claim the income tax deduction)
• The amount you write off for income tax purposes is the GST-exclusive cost. For example, a $21,890 asset (GST-inclusive) is written off at $19,900 for income tax, with $1,990 claimed as a GST credit. A $22,000 asset would not qualify, because its GST-exclusive cost of $20,000 is not less than the threshold
• If the asset is partly for private use, you can only claim the GST on the business-use proportion

Strategic Tips

• Time your purchases: If you are close to the end of the financial year, ensure the asset is used or installed ready for use before 30 June to claim the deduction in the current year.
• Multiple assets: The threshold applies per asset, not in total. You can write off multiple eligible assets in the same year, as long as each one costs less than $20,000.
• Consider your taxable income: The write-off reduces taxable income. If your business has a loss year, the deduction may be less immediately valuable, though losses can be carried forward, and for income years starting on or after 1 July 2026 a company (or other corporate tax entity) that is not a significant global entity can instead carry a revenue loss back against tax paid in either or both of the 2 previous years, limited by its franking account balance. In a profitable year, the deduction saves you tax at your marginal rate.
• Finance the purchase: You do not need to pay cash. A chattel mortgage lets you spread the cash outlay over several years while still claiming the full tax deduction in year one, effectively using the tax refund to help fund the repayments.