Every year around April, the same conversation starts up in workshops, depots and site offices around the country. The accountant mentions the instant asset write-off. The salesperson at the dealership mentions it too, usually with more enthusiasm. And suddenly there is pressure to sign for a machine before 30 June because “you get it all back on tax”. That last bit is where a lot of good operators come unstuck. The write-off is a genuinely useful concession, but it is a deduction, not a rebate, and the rules around thresholds, timing and finance structure decide whether you actually get the benefit you think you are getting.
Short answer: The instant asset write-off lets an eligible small business claim an immediate deduction for the business portion of an eligible asset’s cost in the year it is first used or installed ready for use, instead of depreciating it over several years. Thresholds and eligibility change between income years, so confirm the current rules on ato.gov.au.
What is the instant asset write-off?
It is a tax depreciation concession. Rather than spreading the cost of a business asset across its effective life, an eligible business deducts the whole business-use portion in one income year. The deduction reduces taxable income. It does not hand you cash back, and it does not reduce the purchase price.
That distinction matters more than anything else in this article. If your business buys a $19,000 tipper trailer and claims the full amount, you have reduced your taxable income by $19,000. What that is worth depends on your tax rate. A business paying tax at 25 per cent is looking at roughly $4,750 less tax, not $19,000 back in the bank account. Buying an asset you do not need in order to chase a deduction leaves you worse off in cash terms every single time. Buying an asset you were already going to need, and timing it well, is where the concession earns its keep.
What is the current instant asset write-off threshold?
The threshold has moved repeatedly over the past decade, and it applies per asset rather than as a total spend cap. For the 2025-26 income year (1 July 2025 to 30 June 2026), the threshold is confirmed at $20,000 per asset for businesses with aggregated annual turnover under $10 million, verified against ato.gov.au. This figure is legislated year by year rather than fixed permanently, so confirm the current threshold on ato.gov.au before committing to a purchase in a later income year.
A quick sense of how much this has swung: at various points the threshold has sat at $1,000, $20,000, $30,000, then $150,000, then effectively unlimited under temporary full expensing during the COVID period, and back to $20,000. Announcements in the Federal Budget are not law until they pass Parliament, and there have been years where businesses bought assets in good faith on the strength of a Budget night announcement that took months to be enacted. Two rules keep you safe here:
- Check the current threshold and turnover eligibility directly with the ATO or your accountant, not with the seller of the asset.
- Remember the test is per asset, so a business could write off several qualifying items in the same year provided each one sits under the threshold.
- Understand that the asset must be first used or installed ready for use in the income year you want to claim it, not simply ordered or paid for.
- Note that if you are registered for GST, the relevant figure is generally the GST-exclusive cost, which can pull an asset back under the threshold.
That last point catches people out constantly. A $21,900 asset including GST is $19,909 excluding GST. For a GST-registered business, that may well fall under a $20,000 threshold when it looked like it would not.
What is an immediate deduction actually worth?
The value of the deduction equals the asset’s deductible cost multiplied by your marginal or company tax rate. The table below shows indicative figures only. Your actual position depends on your entity type, taxable income, business-use percentage and current tax rates, so treat these as illustration rather than advice.
| Asset cost (GST exclusive) | Business use | Deduction claimed | Indicative tax effect at 25% | Indicative tax effect at 30% |
|---|---|---|---|---|
| $8,000 | 100% | $8,000 | $2,000 | $2,400 |
| $14,500 | 100% | $14,500 | $3,625 | $4,350 |
| $19,500 | 100% | $19,500 | $4,875 | $5,850 |
| $19,500 | 70% | $13,650 | $3,413 | $4,095 |
Figures above are indicative only, are rounded, and vary depending on your circumstances and the tax rates applying in the relevant income year.
Note the fourth row. Business-use percentage bites. A dual cab ute that does 70 per cent business kilometres and 30 per cent weekend towing is not a full deduction, and the ATO expects you to be able to support the split with a logbook or reasonable records.
Which assets qualify for the instant asset write-off?
Most tangible depreciating assets used in running the business can qualify: vehicles, plant, machinery, tools, technology, office fit-out and similar. The asset generally needs to be used or installed ready for use in the relevant income year. Some assets are specifically excluded, and cars are subject to a separate cost limit.
In practice, the assets we see financed and written off most often across our client base include:
- Utes, vans and light commercial vehicles
- Trailers, tippers and tag trailers
- Skid steers, mini excavators and attachments
- Workshop equipment, hoists, compressors and welders
- Farm implements, augers, spray units and smaller tractors
- Computers, point-of-sale systems and office fit-out
Two exclusions worth knowing. Assets leased out to someone else on a depreciating asset lease may not qualify. And passenger cars are capped by the ATO car limit, which is indexed each year, meaning the deductible cost of a car is capped even if the write-off threshold would otherwise be higher. Commercial vehicles designed to carry a one tonne or greater load are generally treated differently to passenger cars, which is a large part of why the ute is such a popular business purchase.
Can you claim the write-off on an asset you financed?
Yes, in most cases, provided the finance structure treats your business as the owner of the asset for tax purposes. A chattel mortgage does exactly that. You take ownership from day one, the financier takes security over the asset, and your business claims depreciation and the interest portion of repayments.
This is the single most useful thing to understand about the write-off. You do not need to have $19,000 sitting in the account to buy a $19,000 asset and claim the deduction. Under a chattel mortgage, the business acquires the asset, claims the deduction on the full eligible cost in the year the asset is first used or installed ready for use, and repays the financier over the following three to five years. The cash outlay is spread. The deduction is not.
Other structures behave differently. Under an operating lease or rental agreement, the financier owns the asset and claims the depreciation, and you generally deduct the rental payments instead. That can still be sensible, it is simply a different treatment. If claiming the write-off is a priority, the finance structure needs to be chosen with that in mind, not fixed up afterwards. The comparison between ownership-based and non-ownership-based structures is covered in more detail in our guide to chattel mortgage versus hire purchase.
One more timing trap: settlement date is not the test. Installed ready for use is the test. A machine that arrives on 28 June and sits on a truck in the yard unassembled until 4 July may fail that test for the earlier year. If you are cutting it fine, talk to your accountant about delivery and commissioning dates before you sign.
What mistakes do businesses make with the instant asset write-off?
The costly errors are rarely technical. They are usually about buying the wrong thing, at the wrong time, for the wrong reason. Spending a dollar to save 25 or 30 cents is only smart if you needed the dollar spent anyway.
Common ones to avoid:
- Buying purely for the deduction. If the asset does not earn its keep, the tax benefit will not cover the hole.
- Assuming a Budget announcement is law. Check that the threshold has actually been legislated for the year you are claiming.
- Forgetting the GST-exclusive test. Registered businesses use the GST-exclusive cost, which can change eligibility either way.
- Overlooking the car limit. A $70,000 passenger vehicle does not produce a $70,000 deduction.
- Ignoring business-use percentage. Private use reduces the claim, and records need to support the split.
- Leaving finance until the last week of June. Approvals can be fast, but supplier lead times, delivery and commissioning are not always within anyone’s control.
- Claiming when the business made a loss. A deduction against nil taxable income has limited immediate value. Your accountant may suggest a different approach.
If cash flow is the constraint rather than the deduction itself, it is worth understanding your broader options before you decide how to fund the purchase. Our overview of low doc business loans covers the alternatives where full financials are not readily available, and there is more general background across the Business Finance section of the Knowledge Centre. For working capital or broader funding needs beyond a single asset, our business loans page sets out what is available.
Frequently Asked Questions
Is the instant asset write-off the same as getting the money back?
No. It reduces your taxable income, which reduces the tax payable. The benefit is the deduction multiplied by your tax rate, so a business taxed at 25 per cent sees roughly a quarter of the asset cost as a tax effect, not the full amount.
Can I claim the write-off if I finance the asset?
Generally yes, where the finance structure makes your business the owner of the asset, such as a chattel mortgage. Structures where the financier retains ownership are usually treated differently. Confirm the treatment with your accountant before committing to a structure.
Does the threshold apply per asset or per business?
Recent versions of the concession have applied the threshold per asset, meaning multiple qualifying assets can each be written off in the same income year. Because the rules have changed several times, check the current position on ato.gov.au for the relevant income year.
What happens if the asset costs more than the threshold?
Assets above the threshold are usually depreciated under the general depreciation rules or allocated to a small business pool, depending on eligibility. You still get the deduction, it is simply spread across future years rather than claimed all at once.
Does a second-hand asset qualify?
Under the instant asset write-off, eligible second-hand assets have generally been able to qualify for small businesses, which differs from some past concessions that applied only to new assets. Eligibility conditions do change, so verify with your accountant for the income year concerned.
Timing an asset purchase around the end of the financial year works best when the finance is sorted before the deadline pressure hits, not during it. Run the tax side past your accountant, then let us handle the funding side. Call 1300 894 894 or send us the details through the TYG Finance contact page and we will tell you what is realistic.