Guides · 12 October 2026

The $20,000 instant asset write-off in 2026–27, explained simply

From 1 July 2026 the $20,000 instant asset write-off became permanent. Here’s how it works in plain English, and the mistakes that cost owners the deduction.

The short version

According to the ATO, if your business has an aggregated turnover of less than $10 million, you may be able to claim an immediate deduction for the business portion of eligible depreciating assets that:

cost less than $20,000, and
are first used, or installed ready for use, in the income year.

From 1 July 2026, the ATO says this $20,000 threshold is permanent, rather than being extended one year at a time as it was before. For owners, that mostly means certainty: you can plan purchases without waiting to see whether the rule will be renewed.

Five details that matter

It’s per asset. The $20,000 limit applies to each asset, so several eligible assets can each be written off, as long as each one costs less than $20,000.
“Less than” means less than. An asset costing exactly $20,000 doesn’t qualify. If you’re registered for GST and can claim GST credits, the ATO generally looks at the cost excluding GST.
Used or installed, not just bought. The deduction falls in the year the asset is first used or installed ready for use. Paying a deposit in June for something that arrives in August generally puts it in the next year.
Business use only. If you also use the asset privately, only the business-use portion is deductible.
You need to use the simplified depreciation rules. The ATO explains that small businesses must apply those rules to claim the write-off, and some assets are excluded from them.

What about assets of $20,000 or more?

Per the ATO, assets costing $20,000 or more can generally go into the small business pool, depreciated at 15% in the first year and 30% each year after. The ATO also notes that pool balances under $20,000 at the end of the income year can be written off, and that from 1 July 2026 the low-value threshold within these rules moved to $20,000.

The ATO also says improvements to an asset you’ve already written off may be immediately deductible if the cost of the upgrade is less than $20,000.

Back in after opting out?

Normally, if you stop using the simplified depreciation rules you can’t come back for five years. The ATO says this lock-out is suspended until 30 June 2027, so businesses that opted out may be able to re-enter.

The trap: buying for the deduction

A deduction isn’t a refund. If your business pays tax at 25%, a $10,000 asset that’s written off reduces tax by roughly $2,500. You’ve still spent $10,000. The write-off is a good reason to bring forward a purchase you were going to make anyway. It’s rarely a good reason to buy something you don’t need, and late-June spending can squeeze cash flow just as BAS and super are due.

An illustrative example

Say a landscaping business with aggregated turnover of about $1.2 million buys a trailer for $14,000 (excluding GST) and a laptop for $2,500 in March, and both are in use straight away. Each asset costs less than $20,000, so if the business uses the simplified depreciation rules and nothing else excludes them, both may be deductible in full that year. If the owner’s ute is also used privately on weekends, only the business-use share of any vehicle cost could be claimed. This is a made-up example to show how the rules fit together, not a guide to your own situation.

What it means for cash flow

Because the deduction lands in the year of first use, it can lower the tax for that year. If your business pays PAYG instalments, it’s worth checking with your accountant whether those instalments still make sense after a big round of purchases, rather than finding out at lodgement time.

A simple way to plan it

Keep a running list of equipment, tools and tech the business will need in the next 12 months.
Check your books in April or May, not July, so there’s time to plan.
Ask your accountant whether the timing of each purchase matters for your situation.
Keep the invoice, and a note of when the asset was first used or installed.

Want a quick read on where your business stands? The free business tax health check gives a ballpark of the tax to set aside and flags whether you’re likely under the $10M small business line.

The rules have conditions and exclusions this article doesn’t cover. Check the full ATO instant asset write-off page and talk to your accountant or registered tax agent before you buy.

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Sources

General information only. This doesn’t take your circumstances into account and isn’t tax, financial or legal advice. Talk to your accountant or registered tax agent before acting. PRM is not a registered tax agent; tax agent services are provided by Australian Tax & Super Pty Ltd (TPB 25291395).