A tradie who buys a $19,000 trailer in June and a consultant who buys three laptops can both deduct the full cost in one year. That is the instant asset write-off, and for 2025-26 returns now being prepared it is worth getting the details right.
This guide covers the $20,000 limit for 2025-26, what changed from 1 July 2026, which assets are excluded, how the small business pool handles dearer assets, and why employees cannot use it. Figures were checked against the ATO new legislation page and the ATO’s simpler depreciation pages.
It is written for sole traders, partnerships, companies and trusts with turnover under $10 million. For year-end purchase planning in 2026-27, see our instant asset write-off 2026 guide.
Key takeaways
- For 2025-26, small businesses with aggregated turnover under $10 million can write off assets costing less than $20,000 each.
- The ATO says the $20,000 limit is law and permanent from 1 July 2026.
- The limit applies per asset, and the whole cost must be under $20,000 even if you only claim the business share.
- Dearer assets go into the small business pool: 15% in year one, 30% after; a pool balance under $20,000 is written off.
- The lock-out rule is suspended until 30 June 2027.
- Employees cannot use it; they claim items of $300 or less outright and depreciate the rest.
Instant asset write-off at a glance
| Item | 2025-26 | 2026-27 onwards |
|---|---|---|
| Limit per asset | Less than $20,000 | Less than $20,000 (permanent) |
| Turnover test | Aggregated turnover under $10 million | Aggregated turnover under $10 million |
| Timing | First used or installed ready for use 1 July 2025 to 30 June 2026 | First used or installed ready for use in the income year |
| Assets $20,000 or more | Small business pool, 15% then 30% | Small business pool, 15% then 30% |
| Pool balance write-off | Balance under $20,000 | Balance under $20,000 |
Source: ATO – $20,000 instant asset write-off, ATO – small business support measure, ATO – instant asset write-off for eligible businesses, checked 9 October 2026.
What is the instant asset write-off?
Normally a business asset is depreciated over its effective life. The write-off lets an eligible small business deduct the business-use portion of an asset’s cost in the year it is first used or installed ready for use. It is part of the simplified depreciation rules for small business entities.
It brings the deduction forward; it does not create extra deductions. Our guide to assets that depreciate explains the standard rules it replaces.
What changed from 1 July 2026?
Until 2026 the $20,000 limit was extended one year at a time, and older articles (including this one in its first version) described it as proposed. The ATO now says the 2025-26 extension and the permanent $20,000 limit from 1 July 2026 are both law. The ATO’s small business newsroom headlined the change as here to stay.
The suspension of the 5-year lock-out rule also runs until 30 June 2027, so a business that opted out of simplified depreciation can opt back in without waiting.
Who can claim it?
- Sole traders, partnerships, companies and trusts carrying on a business
- Aggregated turnover under $10 million, including connected entities and affiliates
- Using the simplified depreciation rules for that year
Sole traders claim it in the business schedule of their return; see our sole trader tax returns page for what we prepare.
Why employees cannot use it
Employees do not carry on a business, so the small business rules do not apply. An employee can claim a work item costing $300 or less in full if it is not part of a set over $300. Anything dearer is depreciated over its effective life. Our work-related deductions guide covers this.
Which assets qualify and which are excluded?
In most cases both new and second-hand assets qualify, as do eligible upgrades to existing assets costing less than $20,000. The ATO’s assets and exclusions page lists what cannot be written off:
- Capital works, including buildings and structural improvements
- Assets leased out, or expected to be, more than 50% of the time
- Assets used in R&D activities
- Horticultural plants, including grapevines
- Software allocated to a software development pool
- Assets in a low-value pool before you used the simplified rules
A car claimed under the cents per kilometre method cannot also be claimed under the simplified rules. A trade-in reduces what you pay, but the new asset’s full cost is tested against the $20,000 limit.
| Business | Asset | Cost (ex GST) | Outcome |
|---|---|---|---|
| Café | Espresso machine | $18,000 | Write off the business portion in full |
| Consultant | 3 laptops at $2,500 | $7,500 | Each asset is under $20,000, so all three are written off |
| Tradie | Ute | $20,000 | Not less than $20,000, so it goes into the pool |
| Office | Photocopier | $22,000 | Pool: 15% first year, 30% after |
| Employee nurse | Laptop | $1,800 | Not eligible; depreciate as an employee |
Worked example: a tradie’s 2025-26 purchases
Sam, a sole trader electrician with $400,000 turnover, makes three purchases in 2025-26 (figures exclude GST).
Van fit-out costing $19,500, used 90% for business: $19,500 x 90% = $17,550 written off.
Laptop costing $2,400, used 80% for business: $2,400 x 80% = $1,920 written off.
Trailer-mounted equipment costing $26,000, used 100% for business: too dear for the write-off, so it goes into the pool at 15%: $26,000 x 15% = $3,900.
Total 2025-26 deduction: $17,550 + $1,920 + $3,900 = $23,370.
In 2026-27 the pool opens at $26,000 – $3,900 = $22,100. That is not under $20,000, so Sam claims 30%: $6,630. The pool closes at $15,470, and with no new additions the balance is below $20,000 and can be written off in full in 2027-28.
Rule of thumb: Ask two questions before buying for tax reasons: is the whole price under $20,000, and will it be used or installed ready for use before 30 June? If either answer is no, the deduction is smaller or later than you expect.
How do you claim it?
- Record the purchase date, cost and the date first used or installed
- Work out the business-use percentage and keep the evidence
- Claim the business portion in the return for the year of first use
- Put assets of $20,000 or more into the small business pool
The write-off is one part of good tax minimisation planning. For the other tax deductions a business can claim, see our small business tax deductions guide.
Common mistakes with the instant asset write-off
- Using $20,000 as “up to”: the asset must cost less than $20,000.
- Testing only the business share: the whole cost must be under the limit.
- Claiming on order date: the deduction follows first use or installation.
- Employees claiming it: only businesses can use the write-off.
- Buying just for the deduction: a $10,000 deduction saves tax at your marginal rate, not $10,000.
FAQ about the instant asset write-off
Is the $20,000 instant asset write-off permanent?
Yes, according to the ATO. Its new legislation page says the measure is now law and the $20,000 limit applies permanently from 1 July 2026, for small businesses with aggregated turnover under $10 million. It follows the earlier $20,000 limit for 1 July 2025 to 30 June 2026. Check the ATO pages before a large purchase in case the law changes again.
Can employees use the instant asset write-off?
No. The instant asset write-off is part of the small business simplified depreciation rules, so it is only for businesses. Employees claim work items costing $300 or less in full, provided the item is not part of a set costing more than $300. Dearer work items are depreciated over their effective life, based on the work-use percentage.
Does the asset have to cost less than $20,000 including private use?
Yes. The ATO says the entire cost of the asset must be less than the limit, even though you only claim the business portion. A $21,000 car used 50% for business does not qualify for the write-off just because the business share is $10,500. It goes into the small business pool instead.
What if I ordered an asset before 30 June but it arrived later?
The deduction belongs to the income year the asset is first used or installed ready for use, not the year you ordered or paid for it. An asset ordered in June 2026 but installed in August 2026 is claimed in the 2026-27 return. Because the limit is $20,000 in both years, the main effect is timing.
Can a sole trader claim the write-off?
Yes, if the sole trader carries on a business with aggregated turnover under $10 million and uses the simplified depreciation rules. Aggregated turnover includes connected entities and affiliates. The claim is made in the business section of the individual tax return for the year the asset was first used or installed ready for use.
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This article is general information only and is not personal tax or legal advice. Figures and rules were checked against the ATO new legislation, instant asset write-off, simpler depreciation and assets and exclusions pages on 9 October 2026. Rates and thresholds change, so confirm the current position before acting.
