About this programme
The instant asset write-off is a tax deduction rule administered by the Australian Taxation Office (ATO), not a grant or cash payment. It lets an eligible small business immediately deduct the business-use portion of the cost of a depreciating asset in the year the asset is first used or installed ready for use, instead of depreciating it over several years under the general depreciation rules.
For the 2025-26 income year the threshold is $20,000: assets costing less than $20,000 that are first used or installed ready for use for a taxable purpose between 1 July 2025 and 30 June 2026 can be written off in full (business-use portion only) in that year's tax return. The $20,000 threshold has applied for each income year from 2023-24 through 2025-26.
The write-off is a component of the simplified depreciation rules, which also include the small business pool for higher-cost assets. A business must be using the simplified depreciation rules — and have an aggregated turnover under $10 million — to access it; it isn't a separate application or program with its own portal.
The 2026-27 Federal Budget proposed making the $20,000 threshold permanent from 1 July 2026, but that change depends on separate legislation and is not yet reflected on the ATO's 2025-26 guidance used here.
How it works
The $20,000 limit applies per asset, not as a total cap — a business can write off multiple assets in the same year as long as each individual asset costs less than $20,000. New and second-hand assets both qualify.
Only the business-use (taxable purpose) portion of an asset's cost can be claimed. The full cost of the asset must still be under $20,000 for the write-off to apply — private-use apportionment happens after that eligibility test, not before it.
If an asset costs $20,000 or more, it cannot be instantly written off. Instead the business-use portion of its cost is added to the small business pool, where it depreciates at 15% in the first year it's added and 30% in each year after that.
At the end of an income year, if the small business pool's balance (before that year's depreciation deduction) is less than $20,000, the entire pool balance can be written off immediately as a deduction.
A business that has already written off an asset under these rules in an earlier year can also immediately deduct the first later improvement ("second element" cost addition) to that same asset, provided the improvement cost is incurred in the current income year and is itself less than $20,000. Any further improvement costs after that first one go into the small business pool instead.
A car limit applies on top of the write-off threshold for passenger vehicles (fewer than 9 passengers, load capacity under one tonne, excluding motorcycles). The car limit for the 2025-26 income year is $69,674 — even if a vehicle costs more, only the car-limit amount can be used for depreciation purposes, and if that reduced cost is still $20,000 or more it goes into the small business pool rather than being written off instantly.
The 'lock out' rule, which normally stops a business that opted out of simplified depreciation from re-entering for five years, is suspended from 7:30pm AEST 12 May 2015 to 30 June 2026, so a business can move back onto simplified depreciation and use the write-off during that window.
Who can apply
The business must have an aggregated turnover of less than $10 million. Aggregated turnover includes the annual turnover of the business plus that of any affiliated or connected entities.
The business must choose to use the simplified depreciation rules — once elected, they apply to all the business's depreciating assets, not just selected ones, except for the specifically excluded asset types below.
The asset must be first used, or installed ready for use, for a taxable purpose in the 2025-26 income year (1 July 2025 to 30 June 2026) to fall under this year's $20,000 threshold; different thresholds applied in earlier years.
A small number of asset types are excluded from the simplified depreciation rules regardless of cost: assets leased out (or expected to be leased out) more than 50% of the time on a depreciating asset lease; assets used in the business's own R&D activities; assets already allocated to a low-value pool before the business started using simplified depreciation; capital works including buildings and structural improvements; horticultural plants including grapevines; and software allocated to a software development pool (other business software is not excluded).
The business cannot claim the instant asset write-off for a car if it deducts that car's running costs using the cents-per-kilometre method — that method already accounts for depreciation.
How to apply
- There is no separate application form or portal for the instant asset write-off — it is claimed directly on the business's income tax return for the income year the asset was first used or installed ready for use.
- Confirm the business meets the aggregated turnover test (under $10 million) and has chosen to use the simplified depreciation rules for the relevant income year.
- Work out the business-use (taxable purpose) proportion of each qualifying asset's cost, excluding GST if the business is registered for GST and can claim the full GST credit.
- Claim the deduction in the Business and professional items schedule of the relevant income tax return (individual, partnership, company or trust, as applicable).
- Keep records for five years covering how the deduction was worked out, including the asset's cost, the date it was first used or installed ready for use, and the business-use percentage estimate.
Documents you’ll typically need
- Purchase records (invoice/receipt) showing the asset's cost and purchase date
- Evidence of the date the asset was first used or installed ready for use for a taxable purpose
- Records supporting the estimated business-use (taxable purpose) percentage of the asset
- GST registration status and records of any GST credit claimed on the asset
- For assets allocated to the small business pool: opening and closing pool balance workings for the income year
Frequently asked
What is the instant asset write-off threshold for the 2025-26 income year?
It is $20,000 per asset. Eligible small businesses can immediately deduct the business-use portion of the cost of an asset that costs less than $20,000 and is first used, or installed ready for use, between 1 July 2025 and 30 June 2026. The same $20,000 threshold applied for the 2023-24 and 2024-25 income years.
Is the instant asset write-off a grant or a payment?
No. It is a tax deduction timing rule administered by the ATO — it lets you claim the full deduction in one year instead of depreciating the asset over several years. There is no cash payment or separate application; you claim it on your tax return.
Which businesses can use it?
Businesses with an aggregated turnover under $10 million that have chosen to use the simplified depreciation rules. Aggregated turnover includes the turnover of any affiliated or connected business entities, not just the applicant business alone.
Does the $20,000 limit apply to the total spent, or to each asset?
It applies per asset. A business can instantly write off as many separate assets as it likes in the same income year, as long as each individual asset costs less than $20,000.
What happens if an asset costs $20,000 or more?
It cannot be instantly written off. The business-use portion of its cost is instead added to the small business pool, where it depreciates at 15% in the year it's added and 30% in each following year, subject to the car limit if it's a passenger vehicle.
How do I actually claim the deduction on my tax return?
The deduction is claimed in the Business and professional items schedule of your income tax return for the income year the asset was first used or installed ready for use. There is no separate application form.
Does buying a business vehicle qualify?
Only if the vehicle's full cost is under $20,000, and, for passenger vehicles carrying fewer than 9 passengers with a load capacity under one tonne, also under the car limit ($69,674 for 2025-26). A vehicle costing $20,000 or more goes into the small business pool instead, capped at the car limit if it applies.
What if my small business pool balance is under $20,000 at year end?
If the pool's balance, before that year's depreciation deduction, is less than $20,000 at the end of an income year, the entire remaining pool balance can be written off immediately as a deduction for that year.
Reviewed 2026-08-16. Programmes change — confirm current eligibility, amounts and deadlines on the official page before you apply. CapEasy is a private consultancy and is not affiliated with any government authority.