Understanding the 20k Instant Asset Write-Off: Eligibility and Benefits for 2026

Small businesses often face challenges when investing in new equipment or assets due to cash flow constraints. To ease this burden, the Australian government has extended the $20,000 instant asset write-off until June 30, 2026. This tax incentive allows eligible businesses to immediately deduct the full cost of an asset in the year it was purchased, rather than spreading the deduction over several years through depreciation. This post explains how the instant asset write-off works in 2026, who qualifies, and what assets can be claimed.

Small business owner reviewing new equipment purchase

What Is the $20,000 Instant Asset Write-Off?

The instant asset write-off is a tax measure designed to help small businesses improve cash flow by allowing them to claim an immediate deduction for assets costing less than $20,000. Instead of depreciating the asset over several years, businesses can reduce their taxable income in the year they buy and start using the asset. This results in lower tax payments and more available funds to reinvest in the business.

Originally introduced as a temporary stimulus, the write-off has been extended multiple times and now applies through the 2024–25 and 2025–26 financial years. This extension supports small businesses as they recover and grow in a changing economic environment.

Who Can Claim the Instant Asset Write-Off?

To be eligible for the $20,000 instant asset write-off in 2026, your business must meet several conditions:

• Active Trading

Your business must have been actively trading during the 2024–25 financial year.

• Turnover Threshold

The business’s annual turnover must be less than $10 million.

• Simplified Depreciation Rules

You must choose to apply the simplified depreciation rules for the 2025 income year.

• Asset Cost Limit

The asset’s cost must be less than $20,000 (excluding GST).

• Installation Window

The asset must be first used or installed ready for use for a taxable purpose between July 1, 2023, and June 30, 2026.

Meeting these criteria allows your business to claim the full cost of eligible assets immediately, improving your tax position for the relevant financial year.

What Assets Can You Claim?

The instant asset write-off applies to a wide range of tangible assets used in your business. Examples include:

• Office equipment such as computers, printers, and phones

• Tools and machinery used in manufacturing or trades

• Vehicles used solely for business purposes (subject to specific rules)

• Furniture and fittings for business premises

• Software and technology assets under certain conditions

  
  

Assets must be new or second-hand and ready for use within the specified period. Assets costing more than $20,000 do not qualify for the instant write-off but may be depreciated over time under regular rules.

How Does the Write-Off Benefit Your Business?

The main advantage of the instant asset write-off is immediate tax relief. By deducting the full cost of an asset in the year of purchase, your business reduces its taxable income, which lowers the tax payable for that year. This can free up cash that can be reinvested in operations, marketing, or hiring.

For example, if your business buys new equipment costing $18,000, you can claim the entire amount as a deduction in the same financial year. If your business tax rate is 30%, this could reduce your tax bill by $5,400, improving your cash flow.

This incentive encourages businesses to invest in growth and modernization without waiting years to recover the cost through depreciation.

Practical Tips for Using the Instant Asset Write-Off

• Plan Your Purchases

Schedule asset purchases before June 30, 2026, to ensure eligibility.

• Keep Records

Maintain invoices and proof of installation or use dates to support your claim.

• Check Asset Eligibility

Confirm that the asset cost is under $20,000 and that it is used for business purposes.

• Consider Simplified Depreciation

Opting for simplified depreciation rules can make claiming easier and more straightforward.

• Consult a Tax Professional

Tax rules can be complex, so seek advice to maximize benefits and ensure compliance.

What Happens If Your Asset Costs More Than $20,000?

If an asset costs more than $20,000, you cannot claim the instant write-off for the full amount. Instead, you must add the asset to your business’s general depreciation pool and claim deductions over several years according to the Australian Taxation Office’s depreciation schedules.

For example, a $30,000 machine would be depreciated over its effective life, with a portion of the cost deductible each year. While this spreads the tax benefit, it does not provide the immediate cash flow boost of the instant write-off.

Impact on Small Business Growth

The extension of the instant asset write-off supports small businesses by reducing upfront costs and encouraging investment. This can lead to:

• Faster adoption of new technology and equipment

• Improved operational efficiency

• Increased competitiveness in the market

• Enhanced ability to respond to changing customer needs

  
  

By making it easier to invest in assets, the write-off helps small businesses build resilience and prepare for future growth.

If you are looking for funding to purchase an asset, smooth out cash flow before the Payday Super transition, or grow your business, we can help. Our portal is designed for speed—offering a 24-72 hour "Time-to-Yes" without the endless paperwork.

Please note: This article is for general information purposes only and does not constitute tax advice. We recommend consulting with a finance professional to ensure compliance with current ATO guidelines.