Small business owners have spent more than a decade guessing whether the instant asset write off would still be around next year. That guessing game is over. As part of the 2026 to 2027 Federal Budget, the Government confirmed it would permanently set the instant asset write off threshold at $20,000, and that measure is now law. Whether you run a trades business, a cafe, a small professional practice or an online shop, here is what the change actually means for you, and how to plan around it before 30 June.
What actually changed
From 1 July 2026, eligible small businesses can immediately deduct the cost of eligible depreciating assets that cost less than $20,000, instead of depreciating them over several years.
The $20,000 threshold now applies permanently, rather than being extended year by year at Budget time as it has been since 2023.
The general small business pool threshold has also been permanently set at $20,000 from 1 July 2026.
The ‘lock out rule’, which normally stops a business that opted out of the simplified depreciation rules from re-entering for five years, has been suspended until 30 June 2027. This gives businesses more room to move in and out of the simplified rules without being penalised for it.
A decade of guessing: why this threshold kept moving
To understand why this change matters, it helps to know what business owners have been dealing with. The instant asset write off threshold has moved several times over the past decade: $20,000 from 2016 to January 2019, $25,000 for a few months in 2019, $30,000 later that year, then a temporary jump to $150,000 during the early part of the COVID period, before dropping back to $20,000 from July 2023.
Each of those changes came with an expiry date, and each time, business owners and their accountants had to wait on Budget night to find out whether the threshold would be extended again, reduced, or left to fall back to a much lower figure. That uncertainty made it genuinely hard to plan equipment purchases with any confidence.
Making the $20,000 threshold permanent ends that cycle. From 1 July 2026, there is no expiry date to plan around, which means you can time a purchase based on when your business actually needs the asset, not based on when a temporary concession might disappear.
Who can claim it
- Businesses with an aggregated annual turnover under $10 million. Aggregated means your turnover plus that of any businesses connected with or affiliated to yours.
- The asset must be used, or installed ready for use, for a taxable purpose in your business before the end of the income year you are claiming it in.
- The threshold applies per asset, so a business can claim the write off on several separate purchases in the same year, as long as each one costs less than $20,000.
- If you are registered for GST, the $20,000 threshold is applied to the cost of the asset excluding GST. If you are not registered for GST, the threshold includes GST, so the total price you pay is what counts.
What kind of purchases actually qualify
The write off applies to most depreciating assets you buy for your business, provided each one costs less than $20,000. In practice, this covers a wide range of everyday business purchases, including:
- tools and equipment for trades and construction businesses
- computers, laptops and office technology
- furniture and fit out items for an office, shop or clinic
- kitchen and hospitality equipment for cafes and restaurants
- second hand assets, not just new ones
A quick example
Picture a small plumbing business that needs a new set of diagnostic tools costing $4,500, a laptop for quoting jobs on site costing $1,800, and a new work bench for the workshop costing $2,200. Under the instant asset write off, all three purchases can potentially be deducted in full in the year they are first used or installed ready for use, rather than being depreciated gradually over several years.
Because the $20,000 limit applies per asset rather than as a total spending cap, the business is not restricted to a combined $20,000 across all three items. Each purchase is assessed on its own.
Motor vehicles can also qualify, but passenger cars are subject to a separate, lower car limit that is set by the ATO each year, so not every vehicle purchase will fall under the full $20,000 threshold. It is worth checking with us before you commit to a vehicle purchase, since the vehicle rules are more complex than for most other assets.
Why this matters for planning
You no longer need to wait on a Budget night announcement to decide whether to bring a purchase forward before the end of the financial year.
It can help with cash flow, because you deduct the full cost of an eligible asset sooner rather than spreading it over several years.
Because the threshold now applies permanently, there is less pressure to rush a purchase through before 30 June simply because a concession might disappear. That said, the timing rule itself has not changed: an asset still needs to be used, or installed ready for use, before the end of the income year you want to claim it in, so planning ahead is still worthwhile.
Talk to JMB before you buy. The asset has to be used or ready for use, not simply ordered or paid for, before the end of the financial year you plan to claim it in.
Planning purchases across the financial year, not just at 30 June
A permanent threshold changes the way it makes sense to plan. Under the old system, a lot of small businesses fell into a habit of rushing equipment purchases through in May and June, worried that a concession might not be renewed. That rush often meant buying assets before they were genuinely needed, just to use up the concession while it lasted.
With a permanent $20,000 threshold, there is no reason to bring a purchase forward artificially. It makes more sense to buy equipment when your business actually needs it, whether that is in August, December or May, and simply claim the deduction in whichever income year the asset is first used or installed ready for use. This can lead to better business decisions overall, since purchases are driven by operational need rather than a looming deadline.
What to bring to your appointment
If you are planning to claim the instant asset write off this year, it helps to come prepared. Useful things to bring include:
- a list of assets purchased during the year, with purchase dates and costs
- tax invoices for each asset, showing GST treatment
- a note of the date each asset was first used or installed ready for use, if different from the purchase date
- an estimate of the business use percentage, if an asset is also used privately
Quick facts
- Threshold: $20,000 per asset, now permanent from 1 July 2026
- Who qualifies: businesses with aggregated turnover under $10 million
- Applies to: new and second hand eligible depreciating assets used in your business
- Car purchases: subject to a separate, lower car limit
- Status: law, passed as part of the 2026 to 2027 Budget package
Frequently asked questions
Q. Does the write off apply to motor vehicles?
It can, but passenger cars are subject to a separate car cost limit, so not every vehicle purchase will fall under the $20,000 threshold. Talk to us about your specific vehicle before you buy.
Q. What happens if I buy something for more than $20,000?
Assets costing $20,000 or more are generally added to your small business depreciation pool and written off gradually over time, rather than claimed immediately.
Q. Do I need to use the simplified depreciation rules to claim this?
Yes. The instant asset write off is only available if you have elected to use the simplified depreciation rules for the income year you are claiming in.
Q. Can I claim the write off on an asset I use partly for private purposes?
Yes, but only the business use portion. If you use an asset for both business and private purposes, you can only claim the percentage that relates to your business use, and you will need a reasonable basis for working out that percentage.
Q. What if I ordered an asset before 30 June but it has not arrived yet?
The asset needs to be used, or installed ready for use, before the end of the income year you are claiming it in. An asset that is still on order or in transit at 30 June generally does not qualify for that year, even if you have already paid for it.
Sources
ATO, $20,000 instant asset write off (IAWO) here to stay: https://www.ato.gov.au/businesses-and-organisations/small-business-newsroom/20000-instant-asset-writeoff-iawo-here-to-stay
ATO, Making the $20,000 instant asset write off permanent for small businesses: https://www.ato.gov.au/about-ato/new-legislation/in-detail/businesses/20000-dollars-instant-asset-write-off