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 reverted to more targeted thresholds. For the 2024-25 income year, small businesses with an aggregated annual turnover of less than $10 million could instantly write off assets costing less than $20,000 each. The government has indicated it will extend or modify this provision for 2025-26.

What Assets Are Eligible?

Most tangible business assets are eligible, including:

• Vehicles (subject to the car cost limit for passenger vehicles)
• 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

The Car Cost Limit

If the asset is a passenger vehicle (a car designed to carry fewer than 9 passengers and a load of less than one tonne), the deduction is capped at the car cost limit. For the 2025-26 income year, this is expected to be around $69,674 (it is indexed annually by the ATO).

This means if you buy a $90,000 SUV for business use, you can only write off $69,674 in the first year. The remainder cannot be depreciated. If the vehicle is not primarily designed to carry passengers — such as a ute with a payload exceeding one tonne, a van or a truck — the car cost limit does not apply, and you can write off the full cost.

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 more than the instant write-off threshold, 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 $22,000 asset (GST-inclusive) is written off at $20,000 for income tax, with $2,000 claimed as a GST credit
• 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, each up to the threshold.
• 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). 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.