The $20,000 Instant Asset Write-Off is a highly useful tax concession for Australia’s small businesses. Using professional business advisory services will help you maximise the benefits of the write-off. If you are looking into making any equipment investments, technological upgrades, or just taking stock of your taxes, it might be worth your while to learn about the rules for 2026.
It is the year of change for the write-off. Changes are already in law, with more announced that could reshape how businesses plan asset purchases well beyond June.
What Is the Instant Asset Write-Off?
The IAWO lets eligible small businesses immediately deduct the full cost of a qualifying depreciating asset. Rather than spreading it across several years, you claim the business-use portion in the year the asset enters use.
This reduces taxable income in the year of purchase, which strengthens cash flow for businesses reinvesting in growth.
Who Is Eligible for 2025–26?
For the 2025–26 income year, your business must satisfy all of the following conditions:
- Aggregated annual turnover under $10 million
- Currently using the ATO’s simplified depreciation rules
- Each asset costs less than $20,000 (excluding GST if registered; including GST if not)
- The asset is a depreciating asset, land, buildings, and trading stock are excluded
- The asset is first used or installed ready for use by 30 June 2026
- It is important to note that the threshold is per asset, not the total cost of purchases. So, you can claim the instant asset write-off for several qualifying purchases in a year if each is under $20,000. Both new and second-hand assets are eligible.
The Ready-for-Use Test
Ordering or paying for an asset before 30 June is not enough. The ATO requires the asset to be first used, or installed and ready for use, within the relevant income year.
A coffee machine delivered and operational on 28 June qualifies. The same machine sitting boxed in a storeroom on 30 June does not. If you’re planning EOFY purchases, account for delivery and installation lead times now.
What Changes from 1 July 2026?
According to the 2026–27 Federal Budget delivered on 12 May 2026, the IAWO with the $20,000 threshold will be a permanent tax concession for small businesses with aggregated annual turnover under $10 million. Before this decision, the write-off had to be renewed annually, creating uncertainty for the businesses planning equipment purchases in advance.
The legislation that supports the decision, Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, needs to be passed by Parliament. Until this happens, check the current ATO’s position before making any purchasing decisions in accordance with post-June rules.
| 2025–26 (now in law) | From 1 July 2026 (announced) | |
| Threshold per asset | $20,000 | $20,000 |
| Turnover limit | Under $10 million | Under $10 million |
| Status | Legislated | Awaiting Parliament |
EOFY Planning Checklist
Work through these steps before lodging a claim:
- Confirm aggregated annual turnover is under $10 million, including connected or affiliated entities.
- Verify your business is using the simplified depreciation rules.
- Select any assets less than $20,000 that your company actually requires.
- Ensure that the asset is received and installed for use by 30 June 2026.
- Save any invoices, delivery notes, and evidence of installation or first use.
- Check your existing depreciation pool, a balance under $20,000 may also be written off at year end.
How Business Advisory Services Support Your Business Growth Advice Strategy
Many business owners approach the IAWO as a standalone purchase decision. It works better as part of integrated tax and cash flow planning.
An advisor can check whether your aggregated turnover correctly captures connected entities and confirm the right business-use proportion for mixed-use assets. They can also identify whether your existing depreciation pool balance qualifies for write-off at year end, an opportunity many businesses overlook.
DFK BKM’s Business Advisory and Taxation teams provide business advisory services to help Australian SMEs plan asset purchases as part of a long-term strategy, not just an EOFY exercise. For business growth advice that extends beyond tax time, our Virtual CFO service provides the year-round oversight that growing businesses need.
Eligibility depends on your individual business circumstances and the ATO rules in effect at the time of your claim. Speak with a registered tax adviser before acting.
FAQs:
1. What is the Instant Asset Write-Off?
IAWO allows eligible small businesses to immediately deduct the full cost of a qualifying depreciating asset in the income year when it is first used or installed ready for use.
2. Who is eligible for the Instant Asset Write-Off in 2026?
Small businesses with an annual aggregated turnover of less than $10 million will qualify if they apply the ATO’s depreciation rules for the asset to become ready for use before 30 June 2026.
3. What types of assets can be claimed under the Instant Asset Write-Off?
Most depreciating business assets qualify, including equipment, tools, computers, and second-hand items, as long as each costs under $20,000. Land, buildings, and trading stock are all excluded from the concession.