Increased instant asset write-off now a permanent feature for small business
If you’re a small business owner budgeting for new equipment or technology, certainty around the tax treatment of your assets is important. As announced in the 2026–27 Federal Budget, the government has permanently extended the $20,000 instant asset write-off for eligible small businesses. The change has now passed through Parliament and become law.
Eligible small businesses can claim an immediate deduction for eligible assets costing up to $20,000 if the asset is first used, or installed ready for use, for a taxable purpose on or after 1 July 2026.
What’s changed?
The instant asset write-off threshold has been subject to temporary extensions and changes over time, previously being extended until 30 June 2026 (without which the threshold would have dropped back to $1,000 from 1 July 2026). The new law has made the $20,000 threshold permanent.
The measure is intended to encourage business investment and simplify tax planning by providing a stable framework instead of relying on year-by-year legislative extensions.
Who’s eligible?
Small businesses with an aggregated annual turnover of less than $10 million that satisfy the turnover test and choose to apply the simplified depreciation rules are eligible to use the write-off.
How does it work?
If your business is eligible, you can immediately deduct the taxable-purpose portion of the cost of an eligible depreciating asset costing less than $20,000 rather than deducting the cost over several years.
The threshold applies on a per-asset basis. This means that your business may be able to claim multiple assets in the same income year, provided each asset costs less than $20,000 and all eligibility requirements are met.
The asset must be first used, or installed ready for use, in the relevant income year before a tax deduction can be claimed.
The write-off may also apply to the first amount included in the second element of an eligible asset’s cost after the income year in which the asset was immediately deducted under the simplified depreciation rules. The amount must be less than $20,000.
What can be claimed?
The write-off can apply to a wide range of new and second-hand depreciating assets, including:
computers and laptops;
office furniture and fittings;
tools and equipment;
eligible machinery and equipment; and
some business vehicles (subject to the car limits).
Only the taxable-purpose portion of an asset can be claimed. For example, where an asset is used partly for business and partly for private purposes, only the proportion used for a taxable purpose is deductible.
What if the asset costs more than $20,000?
Assets costing $20,000 or more do not qualify for the immediate deduction under the simplified depreciation rules. Instead, you must allocate the business-use portion of your asset to your small business depreciation pool, where it depreciates at 15% in the income year in which it is allocated to the pool and 30% in each following income year.
Under the new measures, if the pool balance is less than $20,000 after the required year-end adjustments, your business may immediately deduct the remaining balance.
You should also remember that the threshold applies to the cost of each individual asset, not to the total amount spent on multiple purchases.
Planning ahead
Investment decisions shouldn’t be driven by tax outcomes alone. Before you decide on purchasing significant business assets, consider your cash flow, financing arrangements, expected benefits to your business, and when your new asset will be first used or installed ready for use.
We can help you determine whether an asset purchase aligns with your business goals and ensure you maximise the tax benefits available under the rules.