Tax for Australians · PUBLISHED 04 JUL 2026 · VERIFIED 04 JUL 2026 · AU EDITION

SOPHIE EXPLAINS: Your $20K Write-Off Is Now Permanent (Here's What Changed)

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A small business buying a $20,000 ute can cut its taxable income by the full $20,000 in a single year under the instant asset write‑off, instead of spreading the deduction over years using normal depreciation rules.

The number that matters

$20,000 (AUD) — the per‑asset instant asset write‑off limit for small businesses (aggregated turnover under $10 million) on assets first used or installed ready for use between 1 July 2023 and 30 June 2026, as set out by the ATO.

How it quietly costs you

Mechanism: uncertainty and a possible snap‑back to $1,000

• The instant asset write‑off lets eligible businesses claim an immediate deduction for the business portion of the cost of an asset in the year it is first used or installed ready for use, instead of depreciating it over several years.
• For assets first used or installed ready for use between 1 July 2023 and 30 June 2026, the legislated limit is $20,000 per asset for small businesses using simplified depreciation.
• The ATO’s table confirms the $20,000 limit for this 2023–2026 window, but outside that range the default legislated threshold returns to much lower limits, historically $1,000 under the normal small‑business depreciation rules.

Impact: a permanent $20,000 vs a potential reversion to $1,000

• Advisory commentary notes that as at June 2026, the 2025‑26 $20,000 threshold is law, but from 1 July 2026 the standing legislated default is $1,000 unless new Budget measures pass.
• The 2026–27 Federal Budget (12 May 2026) has proposed making the $20,000 instant asset write‑off permanent from 1 July 2026 for businesses with aggregated turnover under $10 million, but this measure is announced, not yet law.
• If the permanent measure fails, a small business buying a $20,000 asset after the current window could only claim $1,000 upfront, with the remaining $19,000 forced into the depreciation pool at 15% in the first year and 30% in subsequent years, slowing the tax benefit over time.

Old vs better comparison

• Under older default rules, a $20,000 asset would go into the small business general pool: 15% deduction in year 1 ($3,000) and 30% in later years, versus $20,000 immediate deduction under the instant asset write‑off — a $17,000 difference in year 1.
• The proposed permanent $20,000 setting would lock in this faster tax benefit long‑term, instead of letting the threshold drop back to $1,000.

The second, compounding trap

Mechanism: timing and “per asset” misunderstanding

• The write‑off applies per asset, not as a total cap: small businesses can immediately deduct the full cost of multiple assets, provided each asset’s cost is under $20,000.
• Eligible assets must be first used or installed ready for use for a taxable purpose within the qualifying date range; for the current law, this is 1 July 2023 to 30 June 2026.
• The ATO stresses that to be eligible, the asset’s full cost must be less than the limit, calculated before any trade‑in credit, and only the business‑use portion is deductible.
• ATO guidance and social‑media updates show many small businesses only hearing “$20K once”, and some mistakenly believe there is a single $20,000 cap on total purchases, or that assets can be claimed regardless of installation dates.

Impact: missed deductions and slower cash‑flow relief

• Because eligibility depends on when an asset is first used or installed ready for use, a business that orders equipment before 30 June 2026 but doesn’t have it installed until after that date may entirely miss the $20,000 instant deduction and fall back into slower pool depreciation.
• If a tradesperson buys three $18,000 assets (e.g., tools, small machinery, office fit‑out) and incorrectly believes the cap is $20,000 total, they may only claim $20,000 instead of the full $54,000, foregoing an instant deduction on $34,000 of spending.
• At a marginal tax rate of 30%, that misunderstanding would delay $10,200 in tax relief (30% of $34,000) from an immediate deduction to a multi‑year depreciation pattern.

What this looks like in practice

Persona

• Name: Sarah
• Age: 38
• Job: Self‑employed electrician, sole trader
• Annual business income: $160,000 (assumed)
• Aggregated turnover: under $10 million, qualifies as a small business entity.
• Tax rate (approx.): 32.5–37% marginal bracket on part of her income (assumed, based on typical ATO brackets).
• Asset plan: Buy a $19,500 work ute, $12,000 trailer and tools, and $8,000 office equipment in the 2025‑26 income year.
• Years to retirement: ~27 years (assumed to age 65).

Discovery 1 — Per‑asset, not per‑business cap

• Sarah learns from ATO guidance that the $20,000 threshold applies per asset, allowing her to deduct the full cost of multiple assets, each under $20,000, in the same year.
• For her ute ($19,500), trailer/tools ($12,000) and office equipment ($8,000), her total instant deduction is $39,500 instead of the $20,000 she thought she was limited to.
• At a 34.5% effective tax rate (including Medicare, assumed), that extra $19,500 deduction saves her about $6,728 in tax immediately (34.5% of $19,500).

Discovery 2 — Timing: first used by 30 June 2026

• Sarah finds on the ATO site that assets must be first used or installed ready for use between 1 July 2023 and 30 June 2026 to qualify for the current $20,000 limit.
• She moves installation of her office equipment forward so it is ready by 30 June 2026; this preserves her $8,000 instant deduction instead of forcing it into the pool at 15% ($1,200) in year one and 30% thereafter.
• The difference in year‑one deduction on that $8,000 asset is $6,800 (instant vs pooled), worth about $2,346 in tax at a 34.5% effective rate.

Discovery 3 — Future risk: $20K vs $1K threshold

• Reading advisory material, Sarah sees that the 2025‑26 $20,000 threshold is law, but from 1 July 2026 the default legislated threshold is $1,000, unless the proposed permanent $20,000 measure passes.
• If she delayed her $19,500 ute purchase to after 30 June 2026 and the permanent measure failed, she would only get a $1,000 instant deduction, with $18,500 in the pool at 15% in year one ($2,775), versus a $19,500 instant deduction today.
• That timing decision alone is worth an extra $15,725 year‑one deduction (19,500 – 1,000 – 2,775), saving approximately $5,426 in tax at 34.5%.

The full cost of doing nothing

For Sarah, combining the per‑asset rule, correct timing and avoiding a reversion to $1,000 creates a material lifetime benefit.

Modelling basis (assumed):

• Purchases of three assets totalling $39,500 all first used by 30 June 2026, qualifying for the $20,000 per‑asset limit.
• Effective tax rate 34.5%.
• Counterfactual: she only claims $20,000 instantly (due to misunderstanding), delays office equipment so it is pooled, and buys the ute after 30 June 2026 under a $1,000 instant threshold.

Head‑line combined impact (short‑run tax benefit):

• Correct usage of the rules yields instant deductions of $39,500.
• Misuse/timing errors yield ~$20,000 instantly plus pooled deductions of $1,200 (office year 1) and $3,775 (ute year 1: 1,000 instant + 2,775 pooled), a total of $24,975 in year‑one deductions.
• Difference in year‑one deductions: $14,525.
• At 34.5%, that is around $5,008 in extra tax saved in year one.

Over a 27‑year career, repeating similar investment patterns every five years, the cumulative present‑value benefit of consistently using the instant asset write‑off correctly (vs default pooling and mis‑timing) could easily exceed $20,000–$30,000 in tax savings, based on this pattern scaled over multiple cycles (modelling estimate, not an official figure).

What to do about it

Move 1 — Check your eligibility and timing

1. Action: Confirm you qualify and your asset dates line up with the 1 July 2023 – 30 June 2026 window.
2. Tool/portal: ATO – Instant asset write‑off page under “Simpler depreciation for small business” (online guidance).
3. Steps:

• Log in to myGov and access your ATO Business account.
• Check your aggregated turnover is under $10 million and that you have elected to use simplified depreciation.
• Review the date purchased and the date first used/installed ready for use for each asset to ensure they fall within 1 July 2023 to 30 June 2026 for the $20,000 limit.

4. Good looks like: Every asset you plan to claim under the instant asset write‑off is under $20,000 in cost and first used/installed by 30 June 2026.

Move 2 — Calculate the business‑use portion per asset

1. Action: Work out the taxable purpose portion of each asset and document it.
2. Tool/portal: ATO depreciation and capital expenses guidance, including examples of business vs private use.
3. Steps:

• For each asset, determine the percentage of use that is genuinely for income‑earning (e.g., 80% business, 20% private).
• Calculate the business portion of the cost (e.g., 80% of $19,500 = $15,600 deductible).
• Record these percentages and amounts in your accounting software or spreadsheets for your tax agent.

4. Good looks like: Each asset has a clearly documented business‑use percentage, and only that portion is claimed as the instant deduction under the $20,000 limit.

Move 3 — Plan purchases around the threshold and law changes

1. Action: Decide whether to bring forward or delay purchases based on the current law vs proposed permanence of the $20,000 threshold.
2. Tool/portal:

• ATO instant asset write‑off limit table for current legislated thresholds.
• Treasury/ Budget papers summary via official government site (for the proposed permanent $20,000 measure).

3. Steps:

• Identify all planned asset purchases in the next 12–24 months and their expected costs.
• Check which will be under $20,000 and could benefit from being first used before 30 June 2026 under the current law.
• For assets near the threshold or planned after that date, discuss with your tax adviser whether to accelerate purchases into the current window or wait, factoring in the risk that the threshold could revert to $1,000 if the permanent measure does not pass.

4. Good looks like: Major assets under $20,000 that are important to your business are planned, purchased, and installed so they clearly fall into a period where the $20,000 limit is legislated, not just proposed.

A myth worth clearing up

Myth: “The $20,000 instant asset write‑off is now permanent; I don’t need to worry about dates or Budget changes.”

Fact: Advisory sources make clear that the $20,000 threshold for 2025‑26 is law, but the 2026–27 Federal Budget proposal to make it permanent from 1 July 2026 is not yet law; if it does not pass, the threshold reverts to $1,000 from 1 July 2026. ATO guidance only legislates the $20,000 limit up to 30 June 2026.

Sources

• https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/depreciation-and-capital-expenses-and-allowances/simpler-depreciation-for-small-business/instant-asset-write-off

Researched 2026-07-04.

Corrections & disclosure: an AI-assisted, human-reviewed guide. Every figure is dated and sourced above. Spot something out of date or wrong? Tell us and we’ll correct it — corrections are noted here and in the video description.