Instant Asset Write-Off 2025–26: Your Complete Guide for Australian Small Businesses
Key Takeaways
- Eligible small businesses (turnover under $10 million) can immediately deduct assets costing less than $20,000.
- The threshold applies on a per-asset basis, so multiple qualifying assets can each be written off.
- The asset must be first used or installed ready for use within the income year to qualify.
- For vehicles, the car depreciation limit may apply and private-use portions must be excluded.
Do you run a small business in Australia? The $20,000 Instant Asset Write-Off (IAWO) is one of the best tax breaks you can use right now — and the clock is ticking. The 30 June 2026 deadline is fast approaching. Now is the time to learn how this measure works, check if your business qualifies, and make the most of it before the threshold drops.
What Is the Instant Asset Write-Off?
The Instant Asset Write-Off lets eligible small businesses claim a full tax deduction for the cost of a depreciating asset (similar rules apply to rental property investors) in the same income year it is first used or set up for use. Instead of spreading the deduction over several years, you get the full benefit upfront. This lowers your taxable income (like super contributions do) and boosts your cash flow.
For the 2025–26 income year (1 July 2025 to 30 June 2026), the threshold is $20,000 per asset. Any eligible asset costing less than $20,000 can be written off right away. The measure was extended by the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025. This gives small businesses another year to use this generous break.
Important: Unless the government passes a further extension, the threshold will drop to just $1,000 from 1 July 2026. This makes the current year a key window for planned capital spending and its tax effects.
Who Is Eligible?
To claim the IAWO in 2025–26, your business must meet two conditions:
- Total yearly turnover under $10 million — this includes the turnover of your business plus any linked or related entities.
- You have chosen to use the simplified depreciation rules for the 2025–26 income year.
Good News About the Lock-Out Rule
The “lock-out” rule used to stop businesses from re-entering the simplified depreciation system for five years after opting out. This rule has been paused until 30 June 2026. So even if your business opted out before, you can choose to use these rules again this year.
What Assets Qualify?
The IAWO covers a broad range of depreciating assets — both new and second-hand — used for business. Common examples include:
- Vehicles: Utes, vans, and commercial vehicles (note: passenger cars costing $20,000 or more must go into the small business pool)
- Equipment and machinery: Power tools, farm machinery, commercial kitchen gear, and diagnostic tools
- Technology: Work-from-home deduction rules also apply to computers, laptops, tablets, printers, servers, POS systems, and business software
- Office fit-outs: Desks, chairs, shelving, display cabinets, and other furniture
What’s Excluded?
Not everything qualifies. These items are not eligible for the IAWO:
- Assets costing $20,000 or more (these go into the small business pool)
- Capital works such as buildings and structural changes
- Assets leased out for more than 50% of the time
- Horticultural plants, software in a development pool, and assets used in R&D where an R&D tax offset is claimed
The $20,000 Threshold: Key Details
The $20,000 limit applies per asset. You can claim multiple assets in the same year — each under $20,000 — and write them all off at once.
How GST Affects the Threshold
If your business is registered for GST and can claim the full GST credit, test the threshold against the GST-exclusive cost. If you’re not registered for GST, use the GST-inclusive cost.
Mixed Use Assets
If you use an asset for both business and private purposes, you can only claim the business-use portion. However, the total cost of the asset (including the private portion) must still be under $20,000 to qualify.
The Critical 30 June 2026 Deadline
This is the most important date to mark in your calendar. To claim the IAWO in your 2025–26 tax return, the asset must be first used or set up ready for use by 30 June 2026.
Simply ordering or paying for an asset before the deadline is not enough. It must be working in your business. Supply chain delays and set-up times are real risks, so don’t leave this to the last minute. If you’re planning a big purchase, act now.
What Happens to Assets Over $20,000?
If an asset costs $20,000 or more, you can’t write it off right away. Instead, it goes into the general small business pool. It is then depreciated at:
- 15% in the first year it’s added to the pool
- 30% of the pool’s opening balance in later years
There’s also a bonus: if the total balance of your small business pool falls below $20,000 at the end of the income year (before working out depreciation), you can write off the entire remaining balance at once.
How to Claim the IAWO in Your Tax Return
Claiming the deduction is simple:
- Buy and use the asset — make sure it’s first used or set up by 30 June 2026.
- Work out the deductible amount — apply your business-use percentage to the asset’s cost.
- Claim in your tax return — report the deduction under the simplified depreciation rules section of your business tax return.
Record-Keeping Is Essential
The ATO requires you to keep:
- Tax invoices showing the asset’s cost and purchase date
- Proof the asset was set up and ready for use by the deadline (delivery dockets, set-up records)
- A vehicle logbook if the asset has mixed business/private use
- Finance documents if the asset was bought on credit
Financing Your Asset Purchase
How you finance an asset can affect your tax treatment:
- Chattel mortgage: Usually the best structure. You own the asset from day one. This lets you claim the IAWO and GST credits and BAS duties upfront.
- Finance lease: The lender keeps ownership. You usually can’t claim the IAWO. Lease payments are generally deductible instead.
- Hire purchase: Treated like a loan. You can generally claim the IAWO and deduct interest charges.
Always talk to your accountant before choosing a finance structure.
Don’t Miss This Window
The $20,000 Instant Asset Write-Off is a time-limited chance that could make a real difference to your tax bill this year. The threshold is set to fall sharply after 30 June 2026. Now is the time to review your planned spending and bring forward any purchases that make business sense.
Whether you want to upgrade equipment, invest in new technology, or fit out your premises, the IAWO can help you do it in a more tax-effective way. But you must act before the deadline.
Ready to make the most of the Instant Asset Write-Off before 30 June 2026? The team at TaxServe Australia can help you find eligible assets, structure your purchases correctly, and make sure your claim meets ATO rules. Contact TaxServe Australia today for expert, personalised tax advice for your business.
Sources
- Australian Taxation Office — Instant asset write-off for eligible businesses
- Australian Taxation Office — $20,000 instant asset write-off for 2025–26
- Australian Taxation Office — Simpler depreciation rules for small business
- Moore Australia — Five Months to Maximise the $20,000 Instant Asset Write-Off
What is the Instant Asset Write-Off threshold for 2025-26?
For the 2025-26 income year (1 July 2025 to 30 June 2026), the threshold is $20,000 per asset. Any eligible asset costing less than $20,000 can be written off in full in the year it is first used or set up for use.
Who is eligible for the Instant Asset Write-Off?
Small businesses with a total turnover of less than $10 million are eligible. The asset must be first used or set up for use between 1 July 2025 and 30 June 2026. It must also be used for business purposes.
What types of assets qualify for the Instant Asset Write-Off?
Most depreciating assets used for business qualify. This includes vehicles, tools, equipment, computers, office furniture, and machinery. The asset must cost less than $20,000 (excluding GST if registered). Second-hand assets also qualify. However, the asset cannot be part of a set that together costs $20,000 or more.
Can I claim the Instant Asset Write-Off for a vehicle?
Yes, vehicles can qualify if they cost less than $20,000. However, the car limit for depreciation applies to passenger vehicles. If the vehicle is used partly for private purposes, you can only claim the business-use share. Talk to your accountant to make sure you claim correctly.
When does the Instant Asset Write-Off end?
The current $20,000 threshold applies until 30 June 2026. Assets must be first used or set up for use before this date. The threshold may change in future budgets. Plan your purchases and talk to your tax accountant before the deadline.
Can I claim the instant asset write-off for a second-hand or used asset?
Yes. The write-off applies to both new and second-hand assets, as long as the total cost is less than $20,000 and the asset is used for business. It must be first used or set up by 30 June 2026 to qualify for the 2025–26 income year.
Do I need to keep receipts and records for instant asset write-off claims?
Yes. The ATO requires you to keep tax invoices showing the price and date of purchase. You also need proof the asset was set up by the deadline, such as delivery dockets or set-up records. If the asset has mixed use, keep a logbook. Keep all records for at least five years.
Can I claim multiple assets under the instant asset write-off in the same year?
Yes. The $20,000 threshold applies per asset, not as a total limit. You can buy and write off as many eligible assets as you like in the same year. Each asset must cost less than $20,000. There is no cap on the total number of assets you can claim.
What happens if my asset is used for both business and personal purposes?
If an asset has mixed use, you can only claim the business-use share. However, the total cost (including the private share) must still be under $20,000. For example, if you buy a $15,000 laptop used 60% for business, you can claim $9,000 as a deduction.
Is the $20,000 threshold GST-inclusive or GST-exclusive?
It depends on your GST status. If your business is registered for GST and can claim the full GST credit, the threshold is tested against the GST-exclusive cost. If you are not registered, the threshold applies to the GST-inclusive cost. Check with your accountant to make sure you use the right amount.
What is the deadline to purchase assets for the 2025–26 instant asset write-off?
The asset must be first used or set up for use by 30 June 2026. Just ordering or paying for it before this date is not enough. It must be working in your business. Plan your purchases well ahead of the deadline to allow for delivery and set-up time.
Can I claim both the instant asset write-off and depreciation on the same asset?
No. The write-off gives you the full deduction in the year the asset is first used. This replaces ongoing depreciation claims. If an asset costs $20,000 or more, it must go into the small business pool. It is then depreciated at 15% in the first year and 30% in later years.
Frequently Asked Questions
What is the instant asset write-off threshold for 2025-26?
For eligible small businesses (aggregated turnover under $10 million), the instant asset write-off allows an immediate deduction for eligible depreciating assets costing less than $20,000, on a per-asset basis, provided the asset is first used or installed ready for use in the income year.
Which businesses are eligible for the instant asset write-off?
Small businesses with an aggregated annual turnover of less than $10 million that use simplified depreciation rules can claim the instant asset write-off on eligible assets.
Can I claim the instant asset write-off on a car?
Yes, if the vehicle costs less than the threshold and is used for business, but the car limit for depreciation may apply and the deduction must be apportioned for any private use.