The $20,000 instant asset write-off, in plain terms
The instant asset write-off lets an eligible small business deduct the full business-use cost of an asset in the year it is first used, rather than depreciating it slowly over its effective life. For the 2025-26 income year the threshold is $20,000 per asset, so you can write off several assets in one year as long as each one is under the limit.
To qualify, your business needs an aggregated turnover under $10 million and must use the simplified depreciation rules. The asset has to be first used or installed ready for use for a taxable purpose between 1 July 2025 and 30 June 2026. The $20,000 test is done GST-exclusive if you are registered for GST, because you claim the GST back as a credit.
A worked example
Say you buy a $3,000 tool, you are registered for GST, and you use it 80% for business. The GST-exclusive cost is $3,000 divided by 1.1, which is $2,727.27. That is under $20,000, so it qualifies. Your immediate deduction is $2,727.27 multiplied by 80%, which is $2,181.82. If your tax rate is 25%, that deduction saves you $2,181.82 multiplied by 0.25, which is $545.45 in tax. The deduction lowers your taxable income, it is not a cash refund.
What if the asset costs $20,000 or more?
Then it does not get the instant write-off. You depreciate it over its effective life, or add it to your small business general pool and claim 15% in the first year and 30% each year after. You still get the full deduction over time, it is just spread out. The depreciation calculator works out the yearly amount by both ATO methods. Cars have their own separate limit of $69,674 for 2025-26.
Frequently asked questions
What is the instant asset write-off threshold for 2026?
For the 2025-26 income year the threshold is $20,000 per asset, GST-exclusive. An eligible small business (aggregated turnover under $10 million) can immediately deduct the business portion of an asset that costs less than $20,000, as long as it is first used or installed ready for use between 1 July 2025 and 30 June 2026. This was extended by the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025, which is now law. From 1 July 2026 the threshold is legislated to revert to $1,000 unless the government extends it again.
How does the $20,000 instant asset write-off work?
Instead of depreciating an eligible asset over its effective life, you deduct the whole business-use portion in the year you first use it or install it ready for use. The $20,000 limit applies per asset, so you can write off several assets in the same year. The deduction reduces your taxable income, so what you save is the deduction multiplied by your tax rate. Enter the cost, your business-use share and your rate above to see both figures.
Will the instant asset write-off be extended to 2026?
Yes. The $20,000 instant asset write-off has been extended to cover assets first used or installed ready for use up to 30 June 2026, under the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025. Beyond 30 June 2026 there is no further extension legislated yet, so from 1 July 2026 the threshold is set to fall back to $1,000. Check the ATO for the latest position before you buy.
What are the rules for the instant asset write-off?
Three main tests. First, your business must be a small business with aggregated turnover under $10 million and use simplified depreciation. Second, each asset must cost less than $20,000, tested GST-exclusive if you are registered for GST. Third, the asset must be first used or installed ready for use for a taxable purpose within the eligible window (1 July 2025 to 30 June 2026 for this year). You claim only the business-use portion. Cars have a separate car limit ($69,674 for 2025-26).
Is the cost tested GST-inclusive or GST-exclusive?
If you are registered for GST you claim the GST back as a credit, so the write-off cost, and the $20,000 test, use the GST-exclusive amount. A $21,500 GST-inclusive tool is about $19,545 excluding GST, which is under the limit and qualifies. If you are not registered for GST, you cannot claim the credit, so the cost including GST is what counts. This calculator handles both: pick whether you are registered and whether the figure you entered includes GST.
What happens if the asset costs $20,000 or more?
It does not qualify for the instant write-off. Instead you depreciate it over its effective life, or add it to your small business general pool and claim it at the pool rates (15% in the first year, 30% after that). You still get the deduction, it is just spread across several years rather than claimed all at once. Use the depreciation calculator to work out the yearly amount.
This tool is general information, not tax advice. Thresholds and eligibility change year to year. Check your situation with the ATO or a registered tax agent before you claim.
