Understanding the $20,000 Instant Asset Write-Off Extension
Are you a small business owner planning to invest in new equipment or technology? Here’s some great news: the government is planning to extend the $20,000 instant asset write-off for an additional 12 months, until 30 June 2026.
This extension was announced by the Treasurer as part of an election commitment on 4 April 2025 and is included in the recently introduced Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025. Note that the measure is not yet law—it will take effect once the Bill is passed.
What’s Changing?
If the Bill passes, the $20,000 instant asset write-off threshold will continue to apply until 30 June 2026. Without this amendment, the threshold would revert to the ongoing legislated level of $1,000 from 1 July 2025.
The extension applies to:
- Eligible depreciating assets costing less than $20,000 each
- Eligible cost additions (the second element of an asset’s cost)
- General small business pools, allowing a full write-off where the pool balance is under $20,000 at year-end
Who Can Benefit?
Small businesses with an aggregated turnover of less than $10 million that use simplified depreciation rules can continue to immediately deduct the business portion of the cost of eligible assets first used or installed ready for use by 30 June 2026.
You can claim the write-off on multiple assets, as long as each individual asset costs less than $20,000.
How It Works
- Claim the deduction in the income year the asset is first used or installed ready for use.
- There’s no cap on the number of assets; the $20,000 limit applies per asset.
- Both new and second-hand assets qualify if they meet the simplified depreciation criteria.
- If you previously wrote off an asset under simplified depreciation, you may also immediately deduct the first “second element” cost addition incurred later if it’s under $20,000 and is the first such addition after the original write-off.
- You must reduce your deduction by any private use portion. Importantly, the full asset cost must be below $20,000 regardless of business use percentage.
- For GST-registered businesses that can claim full credits, assess the asset cost excluding GST. If not registered, use the GST-inclusive cost.
What Can You Claim?
The instant asset write-off applies to a wide range of business assets, including:
- Office equipment and computers
- Tools and machinery
- Vehicles (subject to car limits)
- Furniture and fittings
- Both new and second-hand assets
Note: Passenger vehicles are subject to a car limit, and certain assets—like those primarily used for research and development—may not qualify.
When the Limit Is Exceeded
If an asset’s total cost is $20,000 or more, it is not eligible for the instant write-off under simplified rules. Instead:
- Allocate the business-use portion of the asset to the small business pool.
- Depreciate the pool balance at 15% in the first year and 30% each year thereafter.
- If your small business pool balance is below $20,000 at year-end, you can write off the entire balance.
Key Points to Remember
- You must be eligible for and apply simplified depreciation rules.
- Some assets are excluded from simplified depreciation (e.g., certain leased assets and those in low-value pools).
- The car limit applies to passenger vehicles.
- You must exclude private use from your deduction.
- Assets used mainly for research and development may not qualify.
Planning Ahead
If you’re considering purchasing assets for your business, this extension will offer a valuable opportunity to accelerate investments and maximise your tax benefits once it becomes law.
As always, consult your tax adviser to ensure you’re fully leveraging this concession.