$20K instant asset write-off: time to plan your asset purchases

Good news for small businesses, the $20,000 instant asset write-off has been approved by both houses of Parliament and is just awaiting Royal Assent for FY2025-26.

If you’ve been putting off buying that new machinery, tools, or equipment, now is the time to plan. With six months until 30 June 2026, smart planning could deliver significant tax savings.

What’s changed?

The instant asset write-off threshold has been extended for the 2025-26 financial year.

This means eligible small businesses can immediately deduct the full cost of each asset costing less than $20,000, rather than depreciating it over several years.

Who’s eligible?

Businesses with aggregated annual turnover less than $10 million

Applies to sole traders, partnerships, companies, and trusts

How It Works

Per asset, not total: You can claim multiple assets the $20,000 limit applies to each individual asset, not your total purchases.

Example: Buy a $12,000 commercial generator, $8,000 computer software, and $6,000 printer in tools = $26,000 immediate deduction in FY26.

Timing matters:

Asset must be purchased and installed ready for use by 30 June 2026

Ordered in June but delivered in July? No deduction available in 2026FY

Purchased in June but not installed? May not qualify

GST exclusive: If you’re registered for GST, the $20,000 threshold is the GST-exclusive price. So a $22,000 including GST item ($20,000 + $2,000 GST) still qualifies.

What Assets Qualify?

Yes: ✓ Machinery and equipment ✓ Office furniture and computers ✓ Tools and work equipment ✓ Commercial kitchen equipment ✓ Retail fit-out items ✓ Technology and software (including purchased software, but not subscriptions) ✓ Manufacturing equipment ✓ Trade vehicles (utes, vans)

No: ✗ capital works, including buildings and structural improvements. ✗ Assets that are leased out, or expected to be leased out, for more than 50% of the time on a depreciating asset lease. ✗ Assets used in your R&D activities. ✗ Software allocated to software development pool.

What about assets over $20,000?

If an asset costs $20,000 or more, it goes into your small business depreciation pool and is depreciated at 15% in the first year, then 30% each year after.

Why early planning matters

Avoid the June rush-Suppliers get slammed in May/June with businesses scrambling to get assets delivered and installed. Plan now for

Better prices (unless you can secure a better deal EOFY sale)

Secure stock and delivery slots

Ensure installation is completed in time

Have the asset working for you for longer

Cash flow management-Spreading purchases across January to June is easier on cash flow than a $50,000 spend in the last week of June.
Genuine business needs-With time to plan, you’ll make better commercial decisions rather than rushed purchases just to “use up” the deduction.
Time to explore finance optionsIfyou’re financing equipment, you need time to arrange loans or leases. Starting in June is too late.

Common mistakes to avoid

❌ Buying assets you don’t need – Tax savings don’t justify wasteful spending. A $20,000 deduction saves you $5,000 in tax (at 25% company tax rate) but costs you $20,000 in cash.

❌ Ordering too late – If delivery or installation slips to July, you miss FY26 entirely.

❌ Not keeping invoices and evidence – You need proof of purchase date and when it was ready for use.

❌ Claiming assets not yet in use – Delivered but sitting in a box unopened? Not deductible until it’s installed and ready for use.

❌ Not maintaining logbooks for work vehicles – If you provide an employee (including directors) with a vehicle that they can use for private, it is strongly recommended to maintain a logbook to maximise your tax savings (see above article re: logbooks).

Strategic planning: what to consider now

Review your asset needs – Ask yourself and check in with employees in regard to: What’s worn out, obsolete, or holding your business back due lack of efficiency? (a simple example could be a slow 4 year old laptop may impact your marketing team ability edit videos fast enough)

Prioritise and budget – List assets you need, get quotes, plan your cash flow

Consider timing – Can you stage purchases across the next 6 months?

Check eligibility – Confirm your aggregated turnover is under $10 million

Plan for installation – Some assets need professional installation, setup, or testing

Talk to us – We can help you model the tax impact and optimise timing

Questions to ask yourself:

Will this asset improve productivity or revenue?

Would I buy this regardless of the tax deduction?

Can I afford it without compromising cash flow?

Is now the right time, or should I wait for newer models/better prices?

What if you’re over the $10M threshold?

Businesses with turnover over $10 million use the standard depreciation rules:

Most assets depreciate using their effective life (e.g., computers 3 years, car 8 years)

Still get the same amount of deduction, it’s just spread over longer periods.

Even without instant write-off, planning helps you maximise depreciation claims for FY26.