The instant asset write-off lets a small business deduct the full cost of a business asset in the year it starts using it, instead of spreading the deduction over the asset's life. It doesn't reduce the total tax you pay over time. It brings the deduction forward, which helps cash flow.
In the 2026–27 Budget, on 12 May 2026, the Government announced that the $20,000 threshold would be made permanent from 1 July 2026. That measure is now law: it passed as part of the Treasury Laws Amendment (Tax Reform No. 2) Act 2026, which received Royal Assent on 26 August 2026. For the first time in years, a small business can plan purchases without waiting to see whether the threshold will be extended.
This guide covers who's eligible, how the $20,000 limit works with GST and cars, what happens to assets above the limit, the 30 June timing rule, and worked examples.
What is the instant asset write-off threshold for 2026–27?
| Item | Rule for 2026–27 |
|---|---|
| Threshold | Each asset must cost less than $20,000 |
| Applies per | Asset, not per year. Buy three $15,000 assets and you can write off all three |
| Who | Small businesses with aggregated turnover under $10 million that choose the simplified depreciation rules |
| When | The asset is first used, or installed ready for use, in the income year you claim it |
| Status | Permanent from 1 July 2026 (law; Tax Reform No. 2 Act 2026) |
| Assets of $20,000 or more | Go into the small business pool: 15% in the first year, 30% each year after |
| Low pool balance | If the pool balance at year end is below $20,000, you can write the whole balance off |
| Lock-out rule | Suspended until 30 June 2027, so you can re-enter simplified depreciation even if you left in the last five years |
How the threshold has moved
| Period (asset first used or installed ready for use) | What applied to small businesses |
|---|---|
| 6 October 2020 to 30 June 2023 | Temporary full expensing: no cost limit |
| 1 July 2023 to 30 June 2026 | $20,000 write-off, legislated one year at a time |
| From 1 July 2026 | $20,000 write-off, permanent |
If you're catching up on an old return, check the rule for that year. The date that matters is when the asset was first used or installed ready for use, not when you paid for it.
Who can use the instant asset write-off?
You need to be a small business entity, which means your aggregated turnover for the year is under $10 million. Aggregated turnover includes the turnover of businesses connected with you or affiliated with you. A family group that runs three businesses through three companies adds them together.
The write-off is available whatever your structure:
- Sole traders (yes, the most common question)
- Partnerships
- Companies
- Trusts
It isn't available to:
- Businesses with turnover of $10 million or more. They use the general depreciation rules.
- Employees buying tools for their job. They have their own rules, including an immediate deduction for items costing $300 or less.
- Residential property investors who aren't carrying on a business. Read our rental property tax deductions guide.
You must use the simplified depreciation rules as a package. You can't write off one asset and depreciate a similar one over its effective life in the same year. Once you choose simplified depreciation, it covers all your eligible depreciating assets.
Does the $20,000 include GST?
It depends on your GST registration.
- Registered for GST: the cost is measured excluding the GST you can claim back on your BAS. A machine invoiced at $21,450 including GST costs you $19,500 for this test. It qualifies.
- Not registered for GST: you can't claim the GST back, so the cost includes GST. The same $21,450 machine is over the limit. It goes in the pool.
That's one of the few times being GST-registered changes your income tax position directly. If you're near the $75,000 GST threshold, our guide to GST registration explains when registering voluntarily makes sense.
Can I write off a car or ute?
Yes, if it costs less than $20,000 and you're eligible. Three things trip people up.
- The threshold tests the asset's cost, not the business portion. A $24,000 car used 60% for business isn't eligible, even though the business portion is $14,400. It goes into the pool, and you claim the business portion of the pool deduction.
- You can only deduct the business portion of an asset that does qualify. A $18,000 car used 70% for business gives a $12,600 deduction.
- The car limit caps the cost you can depreciate for a passenger car. For 2026–27 it's $69,883. It doesn't help a car get under $20,000, but it does cap what goes into the pool for an expensive car.
Utes that carry a tonne or more and vans built for nine or more passengers aren't "cars" for the car limit, but the $20,000 instant write-off threshold still applies to them like any other asset. Most new utes cost far more than $20,000, so in practice they go into the pool.
If a company or trust buys the vehicle and someone uses it privately, think about FBT before you buy. Our guide to FBT on cars and electric vehicles covers when FBT applies and when it doesn't.
What happens to assets that cost $20,000 or more?
They go into the small business pool and are depreciated as a group:
- 15% in the year you add the asset, whatever the date in the year you bought it
- 30% of the opening pool balance in each later year
- If the closing pool balance (before that year's deduction) falls below $20,000, you write off the whole balance
The pool is simple. You don't track each asset's effective life, and there's no rush to buy on 1 July instead of 30 June, because the first-year rate is the same.
Improvements to assets you've already written off
If you spend money improving an asset you've already written off (an upgrade, not a repair), that cost can generally be written off too if it's under $20,000. Larger improvement costs go into the pool. The rules for these later costs have conditions, so check before you claim.
Worked examples for 2026–27
Hypothetical, round numbers. All businesses are GST-registered with turnover under $10 million, unless stated.
Example 1: a café fit-out of separate items
A café buys a coffee machine ($16,500 excluding GST), a commercial dishwasher ($7,800), and a combi oven ($28,000), all installed and in use by 15 June 2027.
| Asset | Cost (ex GST) | Treatment | 2026–27 deduction |
|---|---|---|---|
| Coffee machine | $16,500 | Instant write-off | $16,500 |
| Dishwasher | $7,800 | Instant write-off | $7,800 |
| Combi oven | $28,000 | Small business pool, 15% | $4,200 |
| Total | $52,300 | $28,500 |
The oven keeps depreciating at 30% of the pool balance from 2027–28.
Example 2: the pool, year by year
A builder adds a $50,000 excavator to an empty pool in 2026–27.
| Year | Opening balance | Deduction | Closing balance |
|---|---|---|---|
| 2026–27 | $50,000 | $7,500 (15%) | $42,500 |
| 2027–28 | $42,500 | $12,750 (30%) | $29,750 |
| 2028–29 | $29,750 | $8,925 (30%) | $20,825 |
| 2029–30 | $20,825 | $6,248 (30%) | $14,577 |
| 2030–31 | $14,577 | $14,577 (balance below $20,000, written off) | $0 |
That assumes nothing else goes in or out of the pool. In practice, adding and selling assets changes the numbers every year.
Example 3: the 30 June trap
A plumber orders a $19,000 van fit-out on 20 June 2027. It's paid for on 25 June. The supplier installs it on 9 July 2027.
The write-off falls into 2027–28, not 2026–27. The asset wasn't used or installed ready for use by 30 June. Paying early doesn't change that.
Example 4: not registered for GST
A sole trader with turnover of $60,000 who isn't registered for GST buys a $21,000 (including GST) piece of equipment. Because she can't claim the GST back, the cost for the test is $21,000. Over the threshold, so it goes in the pool: $3,150 deduction this year.
What's the 30 June timing rule?
To claim the write-off in 2026–27, two things must happen by 30 June 2027:
- You've incurred the cost, which usually means you're contractually committed to pay, and
- The asset is first used, or installed ready for use, for a taxable purpose.
"Installed ready for use" means it's in place and could be used, even if you haven't switched it on yet. An asset sitting in its box in the warehouse doesn't count. An asset on back order doesn't count, no matter when you paid.
If you want the deduction this year, allow for delivery and installation delays, particularly for vehicles and imported equipment. Order in April or May, not the last week of June.
Should you buy assets just to get the write-off?
Usually not. Here's the arithmetic.
| You spend | Company at 25% saves | Sole trader at 39% (37% + Medicare) saves | You're still out of pocket |
|---|---|---|---|
| $10,000 | $2,500 | $3,900 | $6,100 to $7,500 |
| $19,000 | $4,750 | $7,410 | $11,590 to $14,250 |
The write-off makes a purchase you were going to make anyway cheaper this year. It doesn't make an unnecessary purchase worthwhile. And because the threshold is now permanent, there's no deadline pressure: if you need the equipment in August, buy it in August.
The real decision is timing. If you were going to buy in July anyway, buying and installing in June brings the deduction forward by a full year. That can be worth it when this year's profit is unusually high or you expect a lower tax rate next year. If next year will be the bigger year, waiting can be smarter.
Key point: A business loan to buy equipment doesn't change the write-off, but the cash still has to be found. Look at your cash flow forecast before you commit.
Mistakes we see with the instant asset write-off
- Claiming assets delivered after 30 June because they were paid for before it.
- Using the GST-inclusive cost when registered for GST, which pushes a qualifying asset into the pool.
- Using the business portion to get a $24,000 car under $20,000.
- Writing off assets under an operating lease the business doesn't own.
- Splitting one asset into parts to get under the limit. A set of items that work together as one system is generally one asset.
- Forgetting the pool. Assets added years ago stop being depreciated when the asset register gets lost in a software or bookkeeper change.
- Claiming the write-off when turnover is $10 million or more after counting connected businesses.
- Not recording the sale of a written-off asset, so the sale proceeds never make it into income.
How to record the write-off in Xero
Record the purchase to a fixed asset account, not straight to an expense account, so you have a register. In Xero's fixed asset register, set the asset to the simplified depreciation method and use an immediate write-off (or the pool rate, for assets over the limit). Record the date it was first used or installed, not the purchase date. Attach the tax invoice. If an asset is used partly privately, record the business-use percentage.
At year end, we reconcile the fixed asset register to the tax depreciation schedule, because Xero's book depreciation and tax depreciation often differ.
How BPAG handles your asset write-offs
Our depreciation agent prepares the tax and accounting depreciation schedules, including the instant asset write-off, the small business pool and the low pool balance write-off. Your client manager checks the dates, costs, GST treatment and business-use percentages before anything is lodged. The agent drafts; a qualified accountant reviews and signs off.
We bring it up in our year-end planning meeting, part of our tax planning service, so purchase timing is a decision, not an accident. For a full list of what else your business can claim, read our small business tax deductions guide. If you're a builder or tradie with a lot of plant and vehicles, our page for trades and construction covers the issues specific to you.
If your purchases are few and simple, your bookkeeper can record them and the write-off is a line in your return. Where it gets worth paying for advice is vehicles used privately, large fit-outs, and businesses near the $10 million turnover line. Our company tax return service includes the depreciation schedule as standard.
Frequently asked questions
Can I claim the instant asset write-off on a financed asset?
Yes, if you own it, or are treated as owning it. Assets bought outright, with a business loan, under a chattel mortgage or under a hire purchase agreement generally qualify, because you hold the asset. Under an operating lease or rental, the finance company holds the asset, so you deduct the lease payments instead of writing the asset off.
Does the instant asset write-off apply to rental properties?
No. The simplified depreciation rules are for businesses. A residential rental investor isn't carrying on a business in the usual case, so normal depreciation rules apply, including the restrictions on second-hand assets in residential rentals. See our rental property deductions guide.
What if I sell an asset I've already written off?
The business portion of what you sell it for is added to your assessable income in the year of sale. Writing something off brings the deduction forward; it doesn't make it permanent. If the asset was in the small business pool, the sale proceeds reduce the pool balance instead.
Can I write off a building fit-out or renovation?
Structural work, such as walls, built-in fixtures and plumbing, is capital works and is deducted over time at 2.5% or 4% a year, not written off. Separate plant and equipment within a fit-out, such as freestanding furniture, appliances and some lighting, can qualify individually if each item costs less than $20,000.
Does the write-off apply to medium businesses?
Not under the current rules. The simplified depreciation rules, including the $20,000 write-off, are for businesses with aggregated turnover under $10 million. Businesses above that use the general depreciation rules, which spread the cost over each asset's effective life.
I opted out of simplified depreciation years ago. Can I come back in?
Yes. The rule that normally locks you out for five years after you stop using simplified depreciation is suspended until 30 June 2027. If you re-enter, the opening pool balance has to be adjusted for assets added since you last used the rules, so get the calculation right before you lodge.
Official sources
General information only, current as at 18 October 2026. It is not personal tax, legal or financial product advice and doesn't take your circumstances into account. Talk to us before you act. Where a recommendation needs a licensed financial adviser or a solicitor, we work alongside them.