Instant Asset Write-Off Australia: The $20,000 Rule

The instant asset write-off lets an eligible small business deduct the full cost of a business asset in the year it is first used, instead of depreciating it over several years. For a business with an aggregated turnover under $10 million, the current threshold is $20,000, applied to each asset separately. That $20,000 is law for the 2025-26 income year. For 2026-27 the government announced a permanent $20,000 on 12 May 2026, but as at 15 August 2026 that measure is not yet law.

This guide walks through how the write-off works: who qualifies, which assets count, how the per-asset threshold behaves, the timing rule that trips people up, and what happens to assets that cost the threshold or more.

What the instant asset write-off is

Most business equipment is a depreciating asset. Normally you claim its cost a slice at a time over its effective life, so a $6,000 machine might give you a few hundred dollars of deduction each year for a decade. The instant asset write-off collapses that into a single year: you deduct the whole business-use portion of the cost up front.

The cash-flow effect is the point. Bringing the deduction forward reduces your taxable income in the year you buy, which is why the ATO and business.gov.au both frame it as a small-business support measure rather than a permanent structural rule. It sits inside the simplified depreciation rules for small business, so it comes as a package with the general small business pool that handles anything too expensive to write off outright.

The write-off is a timing benefit, not extra money. You claim the same total cost you would have claimed through depreciation anyway, just sooner.

The $20,000 threshold, year by year

The threshold has moved around, and the current year is unsettled, so it is worth seeing the recent history in one place. Each figure below is a per-asset threshold for a business with aggregated turnover under $10 million.

The $20,000 threshold for 2025-26 covers assets first used or installed ready for use between 1 July 2025 and 30 June 2026. That is the return most small businesses are lodging right now, so if you bought eligible gear during that window, the write-off is available to you today.

The 2026-27 position needs care. In the 2026-27 Budget on 12 May 2026, the government announced it would permanently set the instant asset write-off at $20,000 from 1 July 2026. Announced is not the same as legislated. Until Parliament passes it, a business buying an asset now cannot bank on the $20,000 figure for the 2026-27 year. If you are making a large purchase this year, keep the tax invoice and the installation date, watch the ATO page for the change to law, and claim the write-off once it is enacted. Nothing is lost by waiting, because the deduction attaches to the income year the asset was first used, not to the date you file.

Who qualifies: the under-$10-million turnover test

You can use the instant asset write-off if your business has an aggregated turnover of less than $10 million. Aggregated turnover is your own annual turnover plus the turnover of any businesses that are your affiliates or connected with you, which stops a larger group from splitting itself into small pieces to qualify.

The threshold applies per asset, and this is the single most misread part of the rule. A $20,000 cap does not mean $20,000 of total spending. It means each eligible asset must individually cost less than $20,000. A sole trader can buy several qualifying assets in the same year and write off each one, even when the combined spend runs well past $20,000.

Say a photographer with a turnover of $180,000 buys three things during 2025-26: a $4,400 camera body, a $2,600 lighting rig, and a $15,000 second-hand van fit-out. Each asset is under $20,000, so all three are written off in full. That is a $22,000 deduction, even though the combined spend runs past $20,000, because the test is applied to each item and not the tally.

Business-use apportionment and GST

Two adjustments set the number you deduct.

First, you only claim the business-use portion. If that $4,400 camera is used 80% for the business and 20% for personal shoots, the deduction is 80% of $4,400, which is $3,520, not the full $4,400. Keep a reasonable basis for the percentage you use.

Second, GST changes the cost you start from. If you are registered for GST and can claim the full GST credit, you use the GST-exclusive cost of the asset, because you recover the GST separately through your activity statement. If you are not registered for GST, you use the GST-inclusive cost, since the GST is a real part of what the asset costs you. A late GST registration or a missed BAS can quietly change which figure is correct, so settle your GST position before you total the deduction.

Which assets are excluded

The write-off applies to most tangible depreciating assets used in the business, new or second-hand: tools, equipment, computers, furniture, machinery. Several categories sit outside it, and the ATO's assets and exclusions guidance is the list to check before you claim:

• Assets that cost the threshold or more. Anything priced at $20,000 or above cannot be written off immediately. It goes into the small business pool instead (see below).
• Capital works. Buildings and structural improvements are claimed under the separate capital works rules, not the write-off.
• Horticultural plants, including grapevines, which have their own depreciation regime.
• Software allocated to a software development pool. Off-the-shelf software you buy can qualify, but software you allocate to a development pool does not.
• Assets leased out to another party for most of the time, or assets you hold mainly to lease.
• Trading stock. Inventory you hold to sell is not a depreciating asset and is dealt with under the trading stock rules.

Cars carry an extra layer. A car that costs less than $20,000 can be written off like any other asset, but a more expensive car is capped by the separate car limit, and a car above that limit costs far more than $20,000 anyway, so it falls outside the write-off entirely. If vehicles are central to your work, the running-cost side is a different calculation covered in the ATO cents per km and logbook methods.

What happens to assets over the threshold

An asset that costs $20,000 or more is not lost, it is just deducted more slowly through the general small business pool. In the first year an asset enters the pool you deduct 15% of its cost, and in each following year you deduct 30% of the pool's declining balance.

Take a $24,000 trailer bought in 2025-26. It is over the threshold, so it cannot be written off outright. It enters the pool at $24,000, so the first-year deduction is 15%, or $3,600. The next year the balance is $20,400, and 30% of that gives another $6,120, with smaller deductions following each year after as the balance winds down.

There is a bonus buried in the pool rules. If the whole pool balance at the end of a year is below the current write-off threshold, you can deduct the entire remaining balance that year. So a small pool can clear itself out under the same $20,000 line.

The timing trap: first used or installed ready for use

The deduction attaches to the income year the asset is first used or installed ready for use for a taxable purpose, not the year you ordered or paid for it. A machine that arrives on 28 June but is not set up and ready to run until 5 July belongs to the later year. If you are timing a purchase to land a deduction in a particular year, "installed ready for use" is the line that matters, and ordering it in time is not enough.

This is also where records earn their keep. To claim, you need a tax invoice showing the supplier, the date, the amount, and a description of the asset, plus a note of when it was first used and the business-use percentage you applied. The ATO's record-keeping requirements sit behind every line of your return, and an asset write-off is exactly the kind of deduction the ATO expects you to be able to substantiate on request.

Common mistakes

Treating $20,000 as a total budget. It is per asset. Businesses routinely under-claim because they stop at one write-off, thinking they have hit a ceiling that does not exist.

Forgetting the balancing adjustment on sale. The write-off drops the asset's tax value to nil. If you later sell it, or start using it privately, you generally include the business-use portion of what you got for it back in your income that year. A written-off asset is not a permanently tax-free one.

Assuming the current figure carries forward. The $20,000 has been extended year by year, and the 2026-27 permanent version is announced but not yet law. Confirm the figure for the specific income year before you rely on it.

How SparkReceipt helps you claim it

The instant asset write-off lives on per-invoice substantiation: one eligible asset, one tax invoice, one clear record of cost and first use. That is precisely the trail SparkReceipt keeps.

Snap or forward the tax invoice for each asset and the receipt scanner pulls out the supplier, date, amount, and GST, so the number you feed into the write-off is the one on the document, not a guess from memory. The expense tracker keeps every asset purchase categorised and searchable, with the original image attached, and publishes clean records straight to Xero or QuickBooks Online for your return. When your accountant asks for the invoice behind a written-off asset, it is one search away instead of a hunt through a shoebox. See pricing for what each plan includes.

Frequently asked questions

Does the $20,000 include GST? If you are registered for GST and can claim the credit, use the GST-exclusive cost, because you recover the GST through your activity statement. If you are not registered, use the GST-inclusive cost.

Can I write off a second-hand asset? Yes. New and second-hand assets both qualify, as long as the asset is eligible and costs less than the threshold.

Is $20,000 a limit on my total spending? No. It is a per-asset limit. You can write off multiple assets in the same year, each costing less than $20,000, with no cap on the combined amount.

What if my asset costs exactly $20,000? It must cost less than $20,000 to be written off immediately. An asset costing $20,000 or more goes into the small business pool and is deducted at 15% in the first year and 30% thereafter.

Is the $20,000 write-off available for 2026-27? The government announced a permanent $20,000 on 12 May 2026, but as at 15 August 2026 it is not yet law. Keep your records and confirm the figure has been enacted before you rely on it for a 2026-27 purchase.

Key takeaways

• The instant asset write-off is a per-asset deduction: a business with aggregated turnover under $10 million can immediately deduct each eligible asset costing less than $20,000, with no cap on how many assets or the combined total.
• The $20,000 threshold is law for 2025-26 (assets first used or installed ready for use between 1 July 2025 and 30 June 2026), so it is claimable on the return most small businesses are lodging now.
• For 2026-27, the permanent $20,000 was announced in the 12 May 2026 Budget but is not yet law as at 15 August 2026. Keep records and claim once it is enacted.
• You deduct the business-use portion only, starting from the GST-exclusive cost if you are registered for GST.
• Assets costing $20,000 or more are not lost: they enter the small business pool at 15% in year one and 30% each year after.
• Timing runs off "first used or installed ready for use," and the deduction is only as good as the tax invoice behind it.