The Permanent $20,000 Instant Asset Write-Off
Timing clarification — 6 September 2026: Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 2) Act 2026 commences on 1 October 2026 and applies from the 2026–27 income year. Royal Assent, commencement and the first applicable income year are separate dates.
Status at 5 September 2026: Now law. The Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 passed Parliament on 19 August 2026 and received Royal Assent on 26 August 2026 (Act No. 71 of 2026). Effective date: Eligible assets first used or installed ready for use from 1 July 2026. Key threshold: Less than $20,000 per asset for a small business with aggregated annual turnover under $10 million.
A welcome bit of certainty for small business
After years of extensions and last-minute legislation, Parliament has made the $20,000 instant asset write-off permanent from 1 July 2026. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026 is now law.
For many small businesses, that is genuinely useful. Instead of depreciating an eligible asset over several years, you may be able to claim the business-use portion as an immediate deduction in the year the asset is first used or installed ready for use.
The word “deduction” matters. An $18,000 write-off does not mean the ATO sends you $18,000. It reduces your taxable income. The actual tax saving depends on your entity, tax rate, taxable profit and other circumstances.
Who can use the instant asset write-off?
The permanent measure is available to a small business entity with aggregated annual turnover of less than $10 million.
Aggregated turnover can include the annual turnover of connected entities and affiliates, not just the sales shown in one business’s accounts. If your group is near the $10 million mark, check the aggregation rules before assuming you qualify.
The business also needs to use the simplified depreciation rules for the relevant year. Normal asset eligibility rules continue to apply, and any private-use portion is not deductible.
What does “less than $20,000” mean?
The threshold is strictly less than $20,000 per asset. An asset costing exactly $20,000 does not qualify for the immediate write-off.
The test applies asset by asset, so there is no overall $20,000 spending cap. A qualifying business can write off several separate eligible assets, provided each one costs less than $20,000 and the other requirements are met.
Remember that an asset’s tax cost can include amounts needed to bring it to its present condition and location, such as delivery and installation. GST treatment also matters: if you are entitled to claim the GST credit, the relevant tax cost will generally exclude that credit. Please check the final cost with us before relying on a supplier’s sticker price.
Timing: ordered, paid and ready for use are different things
The key date is when the asset is first used or installed ready for use, not simply when you order it, pay a deposit or receive an invoice.
For example, equipment delivered on 28 June 2027 but not installed and ready until 3 July 2027 would generally fall into the later income year. That can shift the deduction — and the cash-flow benefit — by 12 months.
Assets costing $20,000 or more are not lost deductions. Under the simplified depreciation rules, they can generally enter the small business pool and be depreciated at 15% in the first income year and 30% in later years.
The five-year rule that can prevent a business from re-entering simplified depreciation after opting out remains suspended only until 30 June 2027. The $20,000 threshold is now permanent; that lock-out suspension is not.
Practical example: a café equipment upgrade
Harbour Café has aggregated turnover of $1.4 million and uses simplified depreciation. In September 2026 it buys and installs:
an espresso machine with a tax cost of $19,400;
a laptop costing $2,600; and
a commercial refrigerator costing $21,500.
Assuming each item is otherwise eligible and used entirely in the business, the café can immediately deduct the espresso machine and laptop because each costs less than $20,000. The refrigerator is above the threshold, so it goes into the small business pool.
If the café is a base-rate company taxed at 25% and has enough taxable profit, the $22,000 of immediate deductions could reduce tax by up to $5,500. That is a simplified illustration, not a guaranteed refund.
Before you buy: three sensible checks
First, make sure the purchase supports the business. A tax deduction never makes an unnecessary asset free.
Second, confirm the complete tax cost, expected ready-for-use date and business-use percentage. A small installation charge can push an asset over the threshold.
Third, consider cash flow. Financing repayments and GST timing can be very different from the timing of the income-tax deduction.
Frequently asked questions
Can I claim several assets in the same year?
Yes. The less-than-$20,000 threshold applies per asset, not as an annual cap, provided every item and the business meet the rules.
Can an eligible second-hand asset qualify?
There is no general new-asset-only condition for the small business write-off, so an eligible second-hand depreciating asset can qualify. Normal exclusions and business-use rules still apply.
What if an asset costs exactly $20,000?
It does not qualify for the immediate deduction because the law says less than $20,000. It is generally allocated to the small business pool if the pooling rules apply.
Let’s check the numbers before you commit
Planning an equipment, technology or vehicle purchase? Regans Accountants can confirm your eligibility, calculate the asset’s tax cost and help time the purchase sensibly. Contact us before signing, particularly if your turnover is near $10 million or the asset is close to the $20,000 line.
General information only, current at 5 September 2026. Speak with us about your own circumstances.
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