Quick answer: From 1 July 2026, the instant asset write-off is permanent — not another one-year extension. If your business has an aggregated turnover under $10 million and uses the simplified depreciation rules, you can immediately deduct the business portion of any eligible asset costing less than $20,000, provided it is first used or installed ready for use in the income year. Each asset is tested individually. Assets costing $20,000 or more go into the small business depreciation pool instead (15% in year one, 30% after that).
The headline is simple. The traps aren’t. This guide covers how the $20,000 rule works in 2026-27, the two mistakes that cost small businesses real money, and worked examples showing what an $18,000 ute and a $45,000 machine mean for your tax bill.
How the instant asset write-off works
Most business equipment is a depreciating asset: under normal rules you claim its cost gradually over its effective life. The instant asset write-off is a concession inside the simplified depreciation rules that lets an eligible small business skip the spreading-out and claim the whole business-use cost in the year the asset is first used or installed ready for use.
It is a deduction, not a refund. A $18,000 ute written off instantly reduces your taxable income by $18,000 — it does not hand you $18,000. The cash benefit is the deduction multiplied by your tax rate: $4,500 for a company on the 25% base rate. If a purchase only makes sense because of the tax treatment, it usually doesn’t make sense at all.
Three conditions must all be met:
- Your business qualifies. Aggregated turnover below $10 million (counting connected entities and affiliates), and you apply the simplified depreciation rules.
- The asset qualifies. A depreciating asset used for a taxable purpose. Both new and second-hand assets count; a small number of asset types are excluded (for example, assets you mainly lease out to others).
- The timing qualifies. The asset is first used, or installed ready for use, in the income year you claim it. The purchase date alone is not enough.
There is no separate application. You claim the write-off through your tax return when it’s prepared — whether you operate as a sole trader, a partnership, a trust or a company. Our ABN vs ACN guide explains how your structure affects the tax rate that applies to the deduction.
The official thresholds and rules for 2026-27
| Item | 2026-27 rule |
|---|---|
| Instant write-off threshold | Less than $20,000 per asset — permanent from 1 July 2026 |
| Turnover test | Aggregated turnover under $10 million |
| Depreciation regime | Must use the simplified depreciation rules |
| Timing test | First used or installed ready for use in the income year |
| New vs second-hand | Both eligible (with limited exclusions) |
| Car cost limit (2026-27) | $69,883 — applies before the $20,000 test for passenger vehicles |
| Assets costing $20,000 or more | Go to the small business pool: 15% in the first year, 30% each year after |
| Pool balance under $20,000 at year end | Written off in full |
| 5-year lock-out on re-entering simplified depreciation | Suspended until 30 June 2027 |
| Low-value pool threshold | Raised from $1,000 to $20,000 from 1 July 2026 |
Sources: ATO — $20,000 instant asset write-off here to stay; ATO — Instant asset write-off for eligible businesses; ATO — Car thresholds from 1 July.
A short history, because it matters for planning
The default threshold in the legislation is $1,000 — every $20,000 year before this one was a temporary extension that had to be re-legislated before 30 June. The sequence ran $20,000 for 2023-24 and 2024-25, an extension to 2025-26, and now permanent from 1 July 2026 after the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 received Royal Assent in August 2026.
Permanence changes behaviour. Under the old regime, businesses rushed purchases before 30 June not knowing whether the threshold would survive. Now the $20,000 rule is a stable planning input: buy the asset when the business needs it, and the tax treatment is predictable.
Step-by-step: how to claim it
- Confirm you’re in the simplified depreciation regime. This is the gateway — the instant write-off is part of those rules, not a standalone concession. If you previously opted out, the usual 5-year lock-out is suspended until 30 June 2027, so you can re-enter now.
- Test the full cost against $20,000 — on the right GST basis. GST-registered: test the GST-exclusive cost. Not registered: test the GST-inclusive cost. Our GST calculator splits any price both ways in seconds.
- Check the car limit if it’s a vehicle. For passenger vehicles (designed to carry fewer than 9 passengers and a load under one tonne), the 2026-27 car limit of $69,883 applies first — anything above it is never deductible. A ute or van with a payload of one tonne or more isn’t a “car” for tax purposes and faces the normal $20,000 test instead.
- Pin down the “installed ready for use” date. This is the date the asset could actually be used — delivered, assembled, connected, switched on. That’s the income year you claim it in, regardless of when you paid or ordered.
- Apportion for private use. Only the business-use percentage is deductible. Keep a reasonable basis for the split — a logbook for vehicles, a usage diary for mixed-use equipment.
- Include it in your tax return. The deduction goes in the return for the year the asset was first used or installed, under the simplified depreciation rules. Keep the invoice, proof of payment, the first-use date and your business-use records.
If the asset costs $20,000 or more, it goes to the pool instead: 15% in the first year, 30% each year after — and a pool balance under $20,000 at 30 June is written off entirely.
Worked example 1: an $18,000 ute for a company (25% tax rate)
Harbour Marine Pty Ltd is a base-rate company (25% for 2026-27 — see our company tax rates guide) with $2.4 million turnover. In November 2026 it buys a second-hand work ute for $18,000 excluding GST ($19,800 including GST), used 100% for the business. The ute’s payload is over one tonne, so the car limit doesn’t apply — it faces the standard $20,000 test.
- Threshold test: $18,000 (GST-exclusive, since the company claims the GST credit) is less than $20,000 — qualifies.
- Deduction in 2026-27: the full $18,000.
- Tax saved: $18,000 × 25% = $4,500.
- Net cost of the ute after tax: $18,000 − $4,500 = $13,500 (plus the $1,800 GST, which the company claims back separately on its BAS — see our small business GST guide).
Now the trap version. Suppose the ute cost $21,000 excluding GST and the owner used it 80% for business. The business portion is $16,800 — under $20,000 — but the entire $21,000 cost is tested, so the ute fails and the whole $16,800 goes into the pool. Year-one pool deduction: 15% × $16,800 = $2,520, saving $630 in tax instead of $4,200. One thousand dollars over the threshold turns an instant $4,200 saving into a slow drip. This is the mistake the ATO’s own examples warn about, and it’s the one most often gotten wrong.
Worked example 2: $45,000 of equipment for a sole trader
Priya runs a commercial kitchen fit-out business as a sole trader with $600,000 turnover. In February 2027 she buys a $45,000 (excluding GST) commercial oven system, 100% business use. She asks the question everyone asks: “Can I write off $20,000 now and depreciate the rest?”
No — the rule is binary. The entire $45,000 is tested against the $20,000 threshold, so the whole amount goes into the small business pool. Nothing is written off instantly.
Here’s what the pool gives her at the 30% marginal rate (check where you sit with our income tax calculator):
| Year | Pool deduction | Tax saved at 30% | Pool balance |
|---|---|---|---|
| 2026-27 | 15% × $45,000 = $6,750 | $2,025 | $38,250 |
| 2027-28 | 30% × $38,250 = $11,475 | $3,442.50 | $26,775 |
| 2028-29 | 30% × $26,775 = $8,032.50 | $2,409.75 | $18,742.50 |
| 2029-30 | Balance under $20,000 — written off in full: $18,742.50 | $0 | |
Total deductions over four years: the full $45,000, saving $13,500 in tax at 30%. The money isn’t lost — it’s just slower. Compare a $19,000 piece of equipment: instant $19,000 deduction, $5,700 saved in year one alone. That’s the real decision businesses face at the $20,000 boundary, and it’s why pricing a purchase just under the threshold is legitimate tax planning — as long as the purchase itself is genuine.
Common mistakes that cost real money
1. Testing the business portion instead of the full cost
The most expensive misunderstanding on this list. The $20,000 test applies to the entire cost of the asset; only the deductible amount is apportioned for private use. A $40,000 ute used 40% for business ($16,000 business portion) does not qualify. The $16,000 goes into the pool.
2. Confusing the purchase date with the claim year
Buying — or even paying for — an asset in June doesn’t make it a 2026-27 deduction if it isn’t installed and ready for use until July. Order a $15,000 machine on 25 June 2027, have it delivered and commissioned on 6 July 2027, and the deduction belongs to 2027-28. If you’re buying late in the financial year, get the delivery and installation dates in writing.
3. Expecting $20,000 back
It’s a deduction, not a rebate. A $19,000 write-off at the 25% company rate is worth $4,750 — the other $14,250 still comes out of your pocket. Never let the tax tail wag the business dog.
4. Trying to split a big asset
You cannot write off $20,000 of a $45,000 asset and pool the remainder — the whole asset goes one way. Related trap: invoicing a $24,000 “system” as two $12,000 parts. The ATO treats components that function together as a single asset.
5. Forgetting the car limit on dual-cab utes
Not every ute escapes the car limit. If your dual-cab is designed to carry fewer than 9 passengers and its payload (GVM minus basic kerb weight, from the compliance plate) is under one tonne, it’s a passenger vehicle for tax — capped at $69,883 for 2026-27. A $75,000 dual-cab under one tonne payload goes to the pool on the car-limit value, and the excess over $69,883 is never deductible.
6. Using the wrong GST figure
GST-registered: test the GST-exclusive cost. Not registered: test the GST-inclusive cost. A $21,900 GST-inclusive tool is $19,909 excluding GST — it qualifies for a registered business and fails for an unregistered one. Same tool, different answer.
7. Thinking you need to apply somewhere
There’s no form, no pre-approval, no registration for the write-off itself — it’s claimed in your tax return. If your accountant doesn’t know about a purchase, it doesn’t get claimed.
Tips to get the most out of the $20,000 rule
- Plan purchases around the business cycle, not just 30 June. Permanence means you can stop the annual EOFY scramble. Buy when the business needs the asset; the tax treatment is now stable.
- Price awareness at the boundary is fair game. A $21,000 quote vs a $19,500 alternative for equivalent gear is a genuine commercial comparison — and the tax difference (instant vs pool) is part of honest cost-benefit analysis.
- Second-hand is fine — document it properly. For private purchases, keep the bank transfer, a signed receipt from the seller with the date and amount, and a screenshot of the listing. Second-hand assets qualify on the same terms as new ones.
- Don’t forget improvements. An upgrade to an asset you already wrote off — say a $9,000 fit-out on a previously written-off van — can itself be instantly deducted if it’s under $20,000.
- Review your pool balance at 30 June. If the pool’s closing balance is under $20,000, write the whole thing off — most businesses never check.
- Keep the “installed ready for use” evidence. Delivery dockets, installation invoices, commissioning reports, the date the asset first appeared in production — this is what the ATO asks for in a review, and it’s the easiest record to lose.
Frequently asked questions
Is the $20,000 instant asset write-off a cash payment from the ATO?
No. It’s a tax deduction that reduces your taxable income. A $10,000 asset written off by a company on the 25% rate saves $2,500 in tax — the rest of the purchase price is still money you spent.
I ordered an asset in June but it was installed in July — which year do I claim it?
The year it was installed ready for use — July’s income year. The ATO’s test is first use or installation, not the order or payment date. A late-June purchase that isn’t commissioned until July misses the earlier year’s return (it’s still claimable the following year).
I’m registered for GST — is the $20,000 measured before or after GST?
Before — you test the GST-exclusive cost, because you claim the GST separately as a credit on your BAS. If you’re not GST-registered, you test the GST-inclusive cost. Use our GST calculator to split any price both ways before you test it.
My machine cost $45,000. Can I write off $20,000 now and depreciate the rest?
No. The threshold test applies to the whole asset, so the entire $45,000 goes into the small business pool — 15% in the first year ($6,750 deduction), 30% each year after. You can’t carve an instant portion out of a larger asset.
Can I claim a second-hand ute I bought privately?
Yes — second-hand assets qualify on the same terms as new ones, provided the full cost is under $20,000 and it’s first used in your business in the claim year. Keep the bank transfer record, a written receipt from the seller with the date and amount, and a copy of the listing. Private sales get extra ATO scrutiny because the paperwork is thinner — make yours airtight.
What happens if I sell an asset I wrote off?
The sale proceeds are generally assessable income in the year you sell (a balancing adjustment), because you already claimed the full cost. Write off a $15,000 trailer and sell it two years later for $9,000, and that $9,000 goes into your assessable income. The write-off defers tax on the asset’s value — it doesn’t eliminate it.
The bottom line
The permanent $20,000 instant asset write-off is the most useful it’s ever been: stable law, a sensible threshold, and flexible re-entry into the simplified depreciation rules until mid-2027. The businesses that benefit most test the full cost against the threshold, nail the installed-ready-for-use date, and keep records that would survive an ATO review.
Before your next equipment purchase, run the numbers: does it clear $20,000 on the right GST basis? Is it genuinely under the threshold as a single asset? And does the business actually need it? Get those three answers right and the deduction takes care of itself. Our income tax calculator and company tax rates guide show what a deduction is worth at your rate — and our side hustle tax guide covers how it fits a bigger side income picture.
