Small business tax concessions Australia 2025–26 can help eligible businesses reduce tax, improve cash flow, and maximise deductions. With the rising cost of doing business, maximising every available tax saving is no longer a nice-to-have, it’s essential for survival. Yet every year, countless Australian small business owners miss out on thousands of dollars in legitimate tax concessions they qualify for, often because the rules seem too complex.

The reality is that eligibility for most small business tax concessions in Australia for 2025 hinges on clear turnover thresholds. This guide breaks down exactly which concessions are available for the 2025–26 financial year, who is eligible, and how to use them to legally reduce your tax bill and improve your cash flow.

Key Concessions for 2025–26

• $20,000 Instant Asset Write-Off: The most significant opportunity is the instant asset write-off, allowing an immediate deduction for eligible assets costing less than $20,000 each.
• Eligibility is Key: Most concessions are available to businesses with an aggregated turnover of less than $10 million.
• Biggest Tax-Saving Opportunities: Beyond the write-off, key benefits include simplified depreciation rules, a reduced company tax rate of 25%, and valuable Capital Gains Tax (CGT) concessions.
• Plan Ahead: Proactive small business tax planning is crucial to ensure you meet deadlines, such as having assets installed and ready for use by 30 June 2026.

What Are Small Business Tax Concessions?

Small business tax concessions are a suite of tax breaks offered by the Australian Government to help reduce the tax burden and simplify compliance for smaller enterprises. They are designed to improve cash flow, encourage investment, and lower the administrative costs associated with tax reporting.

For the 2025–26 financial year, these concessions are a critical tool for any business owner looking to implement a smart tax minimisation strategy.

Eligibility Criteria: Understanding Turnover Thresholds

Before you can claim any benefits, you must confirm your business is eligible. The Australian Taxation Office (ATO) uses your aggregated turnover to determine your eligibility for most concessions. Getting this calculation wrong is a common and costly mistake.

What is Aggregated Turnover?

Aggregated turnover is not just your business’s annual income. It is the total ordinary income your business earns in the income year, plus the annual turnover of any entities that are ‘connected with’ or ‘affiliated’ with you. This can include:

• Another business you or your spouse control.
• A company where you have significant voting power.
• A business run by an affiliate, such as a close relative.

Calculating this figure correctly is the foundational step. The ATO provides detailed guidance on this, and it’s critical to get it right to avoid compliance issues.

Key Turnover Thresholds for 2025–26

For the 2025–26 income year, two main thresholds unlock different concessions:

1. Under $10 million: This is the primary small business concessions turnover threshold. If your aggregated turnover is below $10 million, you can access the instant asset write-off, simplified depreciation, and various GST and accounting concessions.
2. Under $2 million: A lower threshold applies for accessing the valuable small business CGT concessions. You may also qualify if you pass the maximum net asset value test.

ATO Compliance First: Always calculate your aggregated turnover before making asset purchases or lodging your return. Assuming eligibility without confirming the numbers is a risk that can lead to rejected claims. Check current ATO guidance on their official website: www.ato.gov.au.

Key Small Business Tax Concessions Available in 2025–26

Once you’ve confirmed your eligibility, you can start exploring the specific benefits available. Here is a summary of the most impactful concessions for the 2025-26 financial year.

Concession	Eligibility (Aggregated Turnover)	Key Benefit
Instant Asset Write-Off	< $10 million	Immediate deduction for eligible assets under $20,000.
Reduced Company Tax Rate	Base rate entities (< $50M turnover)	Company tax rate of 25% instead of 30%.
Small Business CGT Concessions	< $2 million or asset test	Options to significantly reduce or eliminate capital gains tax.
GST on a Cash Basis	< $10 million	Account for GST in the period you are paid, not when you invoice.
Small Business Income Tax Offset	Sole traders & partners (< $5M turnover)	Up to a $1,000 tax offset on personal tax.

The Instant Asset Write-Off 2025–26: A Critical Opportunity

The instant asset write-off is one of the most powerful tax deductions for small business Australia offers. It allows eligible businesses to claim an immediate, full deduction for the business portion of an asset’s cost in the year it is first used or installed.

For the 2025–26 financial year, the government has set the threshold at $20,000, providing a significant incentive for business investment. It’s a key part of the government’s support for small enterprises, detailed on the Treasury’s website: treasury.gov.au.

Understanding the $20,000 Threshold

The $20,000 threshold applies per asset, not as a total cap for the year. This means you can purchase and write off business assets in Australia multiple times, provided each individual asset costs less than $20,000.

For example, your business could purchase:

• A new ute for $19,000
• Office computers for $8,000
• New workshop tools for $5,000

All three assets could be fully deducted in the 2025–26 income year, providing a total deduction of $32,000.

Rules for the Instant Asset Write-Off 2025–26

To claim the deduction, you must meet these conditions:

• Aggregated Turnover: Your business must have an aggregated turnover of less than $10 million.
• Asset Condition: The asset must be first used or installed ready for use for a taxable purpose between 1 July 2025 and 30 June 2026.

Crucial Deadline: The ‘installed ready for use’ rule is non-negotiable. Simply ordering equipment before 30 June is not enough. It must be delivered and operational by the deadline to qualify for the claim in that financial year.

Be aware that the threshold is legislated to drop to just $1,000 after 30 June 2026, unless the government announces an extension. This makes strategic purchasing in the 2025-26 year even more critical.

Simplified Depreciation and Other Key Concessions

While the instant asset write-off gets the headlines, other concessions offer substantial savings.

Simplified Depreciation Rules (Small Business Pool)

For assets that cost $20,000 or more, or if you choose not to use the instant write-off, you can use the simplified depreciation rules. This allows you to pool assets and depreciate them at a set rate:

• 15% depreciation in the first year the asset is added to the pool.
• 30% depreciation on the opening balance of the pool in subsequent years.

These small business pool depreciation rules provide a predictable annual deduction and simplify asset management.

Reduced Small Business Company Tax Rate

If your business operates as a company and is classified as a ‘base rate entity’ (i.e., aggregated turnover under $50 million and 80% or less of its income is passive), you benefit from a reduced tax rate. The small business tax rate Australia 2026 for these entities is 25%, compared to the full rate of 30%.

Small Business Income Tax Offset

For sole traders and individuals in a partnership, the small business income tax offset Australia provides a direct discount on your personal tax bill. The offset is 8% of the income tax payable on your net small business income, capped at $1,000 per person per year.

GST and Accounting Concessions

If your aggregated turnover is under $10 million, you can choose to use cash accounting for GST. This means you only account for GST on your Business Activity Statement (BAS) when you receive payment from customers, rather than when you issue an invoice. This can significantly improve cash flow.

Navigating CGT Concessions for Small Business in Australia

When it comes time to sell your business or a significant business asset, Capital Gains Tax (CGT) can take a huge bite out of your proceeds. Fortunately, the CGT concessions for small business in Australia are some of the most generous parts of the tax system.

To be eligible, your business must have an aggregated turnover of less than $2 million or pass the $6 million maximum net asset value test. There are four key concessions:

1. 15-Year Exemption: If you are over 55, retiring, and have owned the asset for at least 15 years, you may pay no CGT at all.
2. 50% Active Asset Reduction: You can reduce the capital gain on a business (or ‘active’) asset by 50%.
3. Retirement Exemption: You can exempt up to $500,000 in capital gains over your lifetime. If you are under 55, this amount must be paid into a complying super fund.
4. Rollover: You can defer the capital gain by purchasing a replacement active asset or making a capital improvement to an existing one.

These concessions can be applied in succession to potentially eliminate a CGT liability. For more information, see our guide for understanding capital gains tax obligations.

How to Claim Your Concessions

Knowing the rules is one thing; applying them correctly is another. Follow this step-by-step process to ensure you maximise your claims for the 2025–26 financial year.

1. Calculate Your Aggregated Turnover: Before anything else, calculate your aggregated turnover for the financial year. This is the cornerstone of your eligibility.
2. Identify All Eligible Concessions: Review the full ATO small business concessions list. Don’t just focus on the instant asset write-off. Consider the tax offset, CGT concessions, and GST accounting methods.
3. Track Expenses and Assets: Maintain meticulous records of all asset purchases, including the date of purchase and, crucially, the date the asset was installed and ready for use.
4. Apply Correct Depreciation Rules: For assets costing $20,000 or more, add them to your small business depreciation pool and apply the 15% (first year) and 30% (subsequent years) rates.
5. Lodge Your Tax Return Correctly: You must opt-in to use these concessions when lodging your tax return. Ensure the correct labels and sections are completed to formalise your claim.
6. Keep All Supporting Records: The ATO requires you to keep all records related to your claims for five years. This includes invoices, receipts, and logbooks proving business use. Strong bookkeeping practices are your best defence in an audit.

Worked Example: Tax Savings in Action

Let’s see how this works in a practical scenario for a small business.

Scenario:

• Business: A plumbing company, operating as a proprietary limited company.
• Aggregated Turnover: $500,000 (making it a base rate entity).
• Asset Purchase: Buys a new work van for $15,000 (ex GST) in February 2026. The van is delivered and ready for use in the same month.
• Profit Before Van: $80,000.

Tax Calculation:

1. Claiming the Instant Asset Write-Off: The company can claim an immediate deduction for the full $15,000 cost of the van because it’s under the $20,000 threshold.
2. New Taxable Income: The profit of $80,000 is reduced by the $15,000 deduction, resulting in a new taxable income of $65,000.
3. Tax Payable: As a base rate entity, the company tax rate is 25%.
   • Tax payable = $65,000 x 25% = $16,250.
4. Tax Saved: Without the write-off, the tax payable would have been $80,000 x 25% = $20,000.
   • Total Tax Saving = $20,000 – $16,250 = $3,750.

This simple action puts an extra $3,750 of cash back into the business.

Tax Planning Checklist for Small Businesses

Use this checklist to ensure you don’t miss any opportunities this financial year.

☐ Confirm turnover eligibility: Calculate your aggregated turnover to confirm you are under the <$10M or <$2M thresholds. 

☐ Identify all available concessions: Create a list of all concessions your business qualifies for (IAWO, depreciation, CGT, GST, etc.). 

☐ Track asset purchases and installation dates: Use a spreadsheet to monitor asset costs and “ready for use” dates to meet the 30 June 2026 deadline. 

☐ Apply correct depreciation rules: Correctly allocate assets costing >$20,000 to the small business pool. 

☐ Lodge an accurate tax return: Ensure you or your accountant correctly elects to use the concessions on your tax return. 

☐ Keep all records for five years: File all invoices, logbooks, and proof of purchase securely.

Common Mistakes to Avoid and How to Fix Them

Navigating tax concessions can be tricky. Here are some common pitfalls and how to steer clear of them.

• Mistake: Missing the asset deadline.
  • Fix: Don’t wait until the last week of June to buy assets. Factor in delivery and installation time to ensure they are ready for use before 30 June.
• Mistake: Calculating turnover incorrectly.
  • Fix: When calculating turnover, remember to include the income from all aggregated or affiliated entities. If in doubt, consult a tax professional.
• Mistake: Not using all available concessions.
  • Fix: Don’t just focus on the instant asset write-off. Review your eligibility for the income tax offset, reduced company tax rate, and GST concessions. Get professional tax advice to ensure you’re not leaving money on the table.

FAQs:

1. What is the instant asset write-off for 2025–26? The instant asset write-off for the year ending 30 June 2026 allows eligible businesses (with <$10M aggregated turnover) to claim an immediate deduction for new or second-hand assets costing less than $20,000 each. The asset must be installed and ready for use by 30 June 2026.

2. Who qualifies as a small business for tax purposes? For most concessions, a small business is an entity with an aggregated turnover of less than $10 million. For the small business CGT concessions, the threshold is lower, at less than $2 million in aggregated turnover (or passing the maximum net asset value test).

3. What is aggregated turnover? Aggregated turnover is your business’s gross income for the year, plus the gross income of any associated businesses (both in Australia and overseas). This is the key figure the ATO uses to determine eligibility for concessions.

4. Can I claim the instant asset write-off for multiple assets? Yes. The $20,000 threshold applies on a per-asset basis. You can claim the full deduction for multiple assets, as long as each individual asset costs less than $20,000.

5. What happens to the instant asset write-off after 30 June 2026? As currently legislated, the instant asset write-off threshold is set to drop back to $1,000 from 1 July 2026. This makes strategic asset planning in the 2025–26 financial year particularly important.

6. What is the small business tax rate for 2025-26? For companies that are ‘base rate entities’ (generally, those with aggregated turnover below $50 million), the company tax rate is 25%. For all other companies, the rate is 30%.

Don’t leave your tax savings to chance. The rules are complex, but expert guidance makes all the difference. To ensure you’re claiming every concession you’re entitled to, book a consult with Nanak Accountants & Associates by calling 1300 NANAK TAX (626 258) or visit us at https://www.nanakaccountants.com.au.