Key Takeaways
- The $20,000 instant asset write-off is no longer a year-to-year extension. The ATO confirms it has been legislated as a permanent feature of the tax system from 1 July 2026, under the Treasury Laws Amendment (Tax Reform No. 2) Act 2026.
- The rule lets small businesses with aggregated turnover under $10 million immediately deduct the full cost of eligible depreciating assets costing less than $20,000 — and the cap applies per asset, so several qualifying purchases can each be written off in the same year.
- Assets of $20,000 or more are not locked out of deductions — they go into the small business depreciation pool at 15% in the first year and 30% each year after, so bigger purchases still attract meaningful first-year deductions.
- A write-off is a deduction, not a refund of the purchase price — you still need to fund the asset. Under a chattel mortgage or equipment loan your business generally owns the asset from day one, which is why financed assets can still qualify. Confirm your own position with your accountant.
- Permanency kills the June panic-buy. For the first time in over a decade, timing a purchase for the asset’s sake — delivery lead times, price, season — beats timing it for the tax year’s sake.
- This is general information only, not tax, credit or financial advice. Eligibility and treatment depend on your circumstances — confirm the current rules with the ATO and your accountant before acting.
For more than a decade, the instant asset write-off has been the tax measure Australian small businesses could never quite rely on. The threshold bounced from $1,000 to $20,000 to $150,000 and back, and every May the federal Budget decided whether the rule would survive another year — usually with the legislation passing at the last minute. That era is over. The $20,000 instant asset write-off has now been made a permanent part of the tax system from 1 July 2026, with the ATO confirming the enabling legislation — the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 — has passed into law.
That one word, permanent, changes how smart businesses should plan equipment and vehicle purchases — and, just as importantly, how they fund them. As finance brokers working with business owners across Geelong, the Bellarine, Melbourne and Australia-wide, our interest is the second half of that sentence: the write-off determines your deduction, but the finance structure determines whether the purchase actually fits your cash flow. This guide covers both.
From Annual Cliffhanger to Permanent Rule: What Actually Changed
Until this year, the $20,000 threshold existed only through temporary extensions — most recently covering 1 July 2025 to 30 June 2026. Businesses and their accountants had learned to treat each June as a use-it-or-lose-it deadline, because nobody could say with confidence what the threshold would be after 30 June. We wrote about exactly that scramble in our earlier instant asset write-off guide back in March, when the measure was still a one-year proposition.
The change was announced in the 2026–27 federal Budget on 12 May 2026 and has since been legislated. From the 2026–27 income year onwards, the $20,000 instant asset write-off applies permanently — no sunset date, no annual renewal, no waiting on a May Budget to find out whether the digger you ordered in April will still qualify in July. For planning purposes, that certainty is arguably worth as much as the deduction itself.
How the $20,000 Instant Asset Write-Off Works From 1 July 2026
The mechanics carry over largely unchanged from the previous temporary rules. Your business qualifies if its aggregated annual turnover is under $10 million and it uses the simplified depreciation rules. Eligible depreciating assets — tools, machinery, vehicles, IT hardware, shop and office fit-out, kitchen equipment and the like — costing less than $20,000 can be deducted in full in the year the asset is first used or installed ready for use. Note those words carefully: ordering and paying for an asset in June doesn’t secure the deduction for that year if it isn’t delivered and ready to work until August.
Two features do the heavy lifting. First, the threshold applies per asset, so a business can buy several qualifying assets in one year and write off each of them. Second, assets that cost $20,000 or more aren’t excluded from deductions — they’re allocated to the small business depreciation pool and deducted at 15% in the first income year and 30% of the remaining balance each year after. And if your pool’s closing balance falls below $20,000 at year end, the whole remaining balance can itself be written off. If you’re registered for GST, the cost is generally assessed net of the GST credits you can claim — your accountant can confirm how the threshold applies to your specific purchase.
| Asset costing under $20,000 | Asset costing $20,000 or more | |
|---|---|---|
| Deduction treatment | Full cost deducted immediately in the year of first use | Allocated to the small business pool: 15% first year, 30% of the balance each year after |
| When the deduction lands | All at once — in the income year the asset is first used or installed ready for use | Spread over several years, front-loaded by the pool percentages |
| Typical examples | Tools, laptops and servers, commercial kitchen gear, trailers, mowers, office and shop fit-out items | Utes and vans, excavators and machinery, trucks, large plant and specialised equipment |
| Multiple purchases | Each eligible asset under the cap can be written off — there is no annual limit on the number of assets | Each joins the pool; a pool balance under $20,000 at year end can be written off entirely |
| Common finance fit | Chattel mortgage, equipment loan, or cash where reserves allow | Chattel mortgage or equipment finance matched to the asset’s working life, often with a balloon |
The cap applies to each individual asset, and there is no limit on how many qualifying assets a business can write off in the same income year. Three $15,000 machines bought in 2026-27 can each be deducted in full. One $45,000 machine cannot — it goes to the depreciation pool instead. Where work can genuinely be done by separate, independently functioning assets, the difference matters; your accountant can advise where the line sits for your purchases.
A Tax Deduction Is Not Cash Flow: How to Fund the Asset
Here is the part the tax commentary routinely skips: writing off a $19,000 asset doesn’t hand you $19,000. It reduces your taxable income by $19,000, which — depending on your structure and rate — returns a fraction of the price at tax time, months after you paid for the machine. The full purchase price still has to leave your account, or be financed, up front. In a year when the cash rate sits at 4.60% after four rises in 2026 and every dollar of working capital is earning its keep, draining the buffer to buy equipment outright can be the most expensive way to claim a deduction.
This is where the finance structure and the tax rule need to be read together. Under a chattel mortgage or standard equipment loan, your business takes ownership of the asset from day one and the lender simply registers security over it — which is why an asset bought on finance can generally still qualify for the write-off in the same way as one bought with cash, with the interest component of repayments typically deductible on top. A lease works differently: the financier owns the asset, so the write-off position changes. The product choice can therefore move your tax outcome, not just your repayment amount — one more reason to have your broker and accountant talking to each other before you sign, and to confirm your own treatment with your accountant. Our guides to equipment finance and equipment finance tax deductions cover the structures in detail, and our asset finance calculator lets you test repayments before you commit.
Financing an instantly-written-off asset also produces a quietly attractive first-year equation: the deduction arrives in full while the cost goes out in monthly instalments. The write-off doesn’t make borrowing free — interest is a real cost and rates vary with your profile and the asset, so compare live quotes rather than assuming — but it does mean the cash-flow hit and the tax benefit no longer land in the same brutal month. For vehicles specifically, the same logic applies whether you’re looking at a single work ute through our car loans service or several vehicles at once — though remember passenger cars have their own depreciation cost limit above this threshold, another detail worth an accountant’s eye.
Buying Smarter Now the June Scramble Is Gone
The annual extension cycle trained a generation of business owners to cram equipment purchases into May and June — often paying full freight in the busiest quarter for dealers, and occasionally buying gear they didn’t quite need because the deduction was about to vanish. Permanency flips that logic. The deduction will be there next quarter and next year, so the purchase decision can finally run on business fundamentals: When does the season actually demand the new machine? When are dealers hungriest to discount? How long is the delivery lead time — and will the asset be installed ready for use before the year ends if the deduction timing matters to you?
It also rewards a different financing conversation. Instead of one frantic pre-June approval, a business can map the year’s asset plan — say, a trailer in November, a second vehicle in February, a machinery upgrade after the autumn season — and structure finance across the program: an approved limit ready to draw as each purchase lands, each asset matched to a term that suits its working life. That’s a sharper way to borrow than three rushed applications, and it keeps working capital free for the things that can’t be financed against an asset — covered further in our small business loans guide.
Client Example
Picture a landscaping contractor in Lara heading into the spring rush with two purchases on the list: a commercial mower at around $17,500 and a compact excavator at around $68,000, both ex GST. Under the now-permanent rules, the mower sits under the $20,000 cap and can be written off in full this year, while the excavator goes into the depreciation pool at 15% in year one. Rather than draining the business account in its busiest quarter, both are financed under chattel mortgages — the business owns each machine from day one, so the write-off and pool deductions are claimed just as they would be on a cash purchase, and repayments are spread across the machines’ working lives while spring revenue comes in. The scenario is illustrative only, names no lenders or rates, and the right structure depends on circumstances — but the pattern of matching each asset to the rule and the finance term is exactly what the permanent threshold now lets businesses plan calmly instead of cramming into June.
Pro Tip
Before any purchase near the threshold, get the asset’s GST-exclusive cost in writing from the supplier — including delivery and installation where they form part of the asset’s cost — and run it past your accountant against the $20,000 line before you commit. A quote that drifts a few hundred dollars over the cap at the last minute changes the deduction from immediate to pooled. And if the deduction timing matters, confirm the delivery date in the contract: it’s first use or installation, not the invoice date, that decides which year the write-off lands in.
Frequently Asked Questions
Is the instant asset write-off still available in 2026-27?
Yes — and it no longer has an end date. The ATO confirms the $20,000 instant asset write-off has been made permanent from 1 July 2026 under the Treasury Laws Amendment (Tax Reform No. 2) Act 2026. Small businesses with aggregated turnover under $10 million can immediately deduct eligible depreciating assets costing less than $20,000, with no annual renewal to wait on.
Can I claim the instant asset write-off on a financed vehicle or machine?
Generally yes, where the finance structure gives your business ownership of the asset — as a chattel mortgage or standard equipment loan does from day one. The asset is treated much as a cash purchase for the write-off, and the interest component of repayments is typically deductible as well. Leases work differently because the financier owns the asset. Your accountant can confirm the treatment for your specific structure before you sign.
What happens if the asset costs more than $20,000?
It isn’t locked out of deductions — it goes into the small business depreciation pool, deducted at 15% in the first income year and 30% of the remaining balance in each year after. If the pool’s closing balance drops below $20,000 at the end of an income year, the whole remaining balance can be written off. The threshold is generally assessed on the asset’s cost net of claimable GST credits for GST-registered businesses — confirm the numbers with your accountant.
Who is eligible for the $20,000 instant asset write-off?
Businesses with aggregated annual turnover under $10 million that use the simplified depreciation rules. The asset must be an eligible depreciating asset costing less than $20,000, first used or installed ready for use in the income year you claim. The cap applies per asset, so multiple qualifying purchases can each be written off. Eligibility details and exclusions apply — check the ATO’s current guidance or ask your accountant.
Planning an Equipment or Vehicle Purchase This Year?
We structure chattel mortgages and equipment finance around how the write-off rules actually work — matching each asset to the right term, keeping your working capital free, and comparing bank and non-bank lenders so the deal fits the machine, not the other way around. Based near Geelong, working with business owners Australia-wide by phone and video. No obligation.
Melanie McNaughton
Director & Senior Finance BrokerWith years of experience in mortgage broking and finance, Melanie helps first home buyers, refinancers, investors and business owners across Geelong, the Bellarine, the Surf Coast, Melbourne and regional Victoria make their money work harder. Contact our team on 03 9020 2699.