Instant asset write-off: $20,000 limit for 2025–26 and 2026–27

Instant asset write-off 2026–27: is it legislated?

Yes. The ATO's small business newsroom confirms the $20,000 instant asset write-off is permanent from 1 July 2026. For 2025–26 the limit is also $20,000 (it has applied to assets first used or installed ready for use on or after 1 July 2023).

The limit applies per asset, so you can write off several assets in the same year as long as each one costs less than $20,000. New and second-hand assets both qualify, and so can the first improvement to an asset you already wrote off, if that improvement costs less than the limit.

Instant asset write-off thresholds by year

The limit depends on when the asset was first used or installed ready for use, not when you paid for it. The ATO’s table for businesses with aggregated turnover under $10,000,000 using simplified depreciation is below. The ATO notes that for the 2020–21, 2021–22 and 2022–23 income years temporary full expensing may have been available instead, so older assets may have been fully deducted under that scheme.

Who can use the instant asset write-off

You need aggregated turnover under $10,000,000. Aggregated turnover includes the turnover of businesses that are your affiliates or connected with you, so a group of related entities is tested together. You must also choose the simplified depreciation rules for the year, and the ATO is clear that it is all or nothing: you apply the whole set of rules (including the small business pool) to all your depreciating assets, not just the write-off.

A few assets are excluded from simplified depreciation, and assets used for research and development under the R&D tax offset rules must use the general depreciation rules instead.

How to work out your instant asset write-off claim

The test uses the full cost, but the deduction is only the business portion. Work through it in this order:

• Find the asset’s cost. If you are registered for GST and can claim the full GST credit, use the GST-exclusive price. If you are not registered, the GST is part of the cost.
• For a trade-in, use the purchase price before the trade-in credit.
• Check the full cost is less than $20,000. An asset costing exactly $20,000 does not qualify.
• Multiply by your business-use percentage to get the deduction.
• Claim it in the year the asset was first used or installed ready for use, in the Business and professional items schedule of your return.

Worked example: what the write-off saves in tax

A GST-registered electrician with a taxable income of about $95,000 buys a $14,800 (GST-exclusive) welder used only for work and a $3,200 laptop used 80% for business. Both cost less than $20,000, so the 2026–27 deduction is $14,800 + $2,560 = $17,360.

At 2026–27 rates that deduction reduces income tax and Medicare levy by about $5,555. The write-off brings the deduction forward rather than creating a new one: if the same assets were depreciated, the total deductions over their lives would be similar, but you would wait years for them.

Assets costing $20,000 or more: the small business pool

If an asset costs $20,000 or more and you use simplified depreciation, its business portion goes into the general small business pool. The pool is deducted at 15% in the year an asset is added and 30% of the opening balance each year after. When the pool balance at the end of a year (before that year's deduction) is less than $20,000, you deduct the whole balance.

Example: a $48,000 light truck used only for business is added to the pool. Deductions are $7,200 in year one, $12,240 in year two and $8,568 in year three, leaving $19,992, which is below the limit, so (with no other assets in the pool) the balance is written off the following year.

Passenger cars have an extra cap. The ATO’s car limit for 2025–26 is $69,674, so a $80,000 car used 75% for business adds only 75% of $69,674 to the pool and the excess cost is never deductible. A GST-registered business can claim a GST credit of no more than one-eleventh of the car limit.

Opting back in: the lock-out rule is suspended

Normally a business that stops using simplified depreciation cannot come back for 5 years. The ATO says this lock-out rule is suspended from 7:30 pm AEST 12 May 2015 to 30 June 2027, so a business that left the rules can re-enter and use the write-off. When you return, your opening pool balance is your previous closing balance plus the business portion of depreciating assets acquired since you last used the rules.

The ATO's newsroom also notes that from 1 July 2026 the low-value pool threshold rose from $1,000 to $20,000. That pool is part of the general depreciation rules, which apply to businesses not using simplified depreciation.

Common instant asset write-off mistakes

Watch for these traps before you claim:

• Claiming in the year of purchase when the asset was not installed ready for use until the next year.
• Testing only the business portion against the limit. The whole cost must be under the limit.
• Splitting one asset into several invoices to get each piece under the limit.
• Including GST in the cost when you are registered and claiming the GST credit.
• Assuming it is a cash refund. The write-off is a deduction: it is worth your marginal tax rate times the claim, and only if you have taxable income to offset.
• Not keeping records. Keep invoices, proof of when assets were installed, business-use calculations and pool workings for 5 years.