$20,000 Instant Asset Write-Off 2026–27

The Australian Government has made the $20,000 instant asset write-off permanent, giving eligible small businesses greater certainty when investing in equipment, technology and other business assets.

For many business owners, purchasing new equipment is an important part of improving productivity, supporting growth and remaining competitive. However, the cost of these investments can place pressure on cash flow, particularly when businesses are balancing ongoing operating expenses, staffing costs and other financial commitments.

The permanent $20,000 instant asset write-off provides an opportunity for eligible businesses to claim an immediate tax deduction for qualifying assets, rather than spreading the deduction across several years through depreciation.

But what does the change actually mean for your business? Who qualifies, which purchases are eligible, and how much tax could you potentially save?

In this guide, we explain how the instant asset write-off works in the 2026–27 financial year, what has changed and the important considerations businesses should understand before making an investment.

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

The instant asset write-off is an Australian tax concession that allows eligible small businesses to immediately deduct the business-use portion of qualifying depreciating assets costing less than $20,000.

Under standard depreciation rules, businesses generally claim deductions for the cost of equipment and other depreciating assets over several years, reflecting their decline in value.

The instant asset write-off changes the timing of the deduction. Instead of claiming smaller deductions over the asset’s effective life, an eligible business can claim the relevant amount in the income year the asset is first used or installed ready for use.

For example, if an eligible business purchases a computer system costing $8,000, excluding recoverable GST, and uses it entirely for business purposes, it may be able to claim the full $8,000 as a tax deduction in that financial year.

Importantly, the instant asset write-off is a tax deduction, not a government reimbursement or cash payment. It reduces taxable income, which may reduce the amount of income tax payable.

What Has Changed for the 2026–27 Financial Year?

Previously, the $20,000 instant asset write-off was subject to temporary extensions, leaving businesses uncertain about whether the same threshold would apply in future financial years.

As part of the Australian Government’s 2026–27 tax reforms, the $20,000 threshold was made permanent, effective from 1 July 2026.

The change was legislated in August 2026, providing greater certainty for small businesses planning future investments.

Under the permanent arrangement:

Eligible small businesses must have aggregated annual turnover of less than $10 million.
The instant asset write-off applies to qualifying depreciating assets costing less than $20,000.
The threshold applies to each individual asset rather than the total value of purchases made during the financial year.
Eligible businesses can claim deductions for multiple qualifying assets.
Both new and second-hand depreciating assets may qualify, subject to the relevant requirements.

The key benefit of making the concession permanent is greater certainty. Businesses can now consider the $20,000 threshold as part of longer-term investment planning rather than waiting for annual announcements about whether the concession will be extended.

However, permanent availability does not mean every purchase automatically qualifies. Businesses must still meet the relevant eligibility requirements and apply the simplified depreciation rules correctly.

Who Is Eligible for the Instant Asset Write-Off in 2026–27?

The permanent instant asset write-off is available to eligible small businesses with aggregated annual turnover of less than $10 million that use the simplified depreciation rules.

Aggregated turnover is not necessarily the same as the revenue shown in an individual business’s accounts. It can include the annual turnover of connected entities and affiliates, depending on the circumstances.

For example, a business operating as part of a group may need to consider the turnover of related entities when determining eligibility.

The concession can potentially apply to eligible businesses operating through different structures, including sole traders, partnerships, companies and trusts.

To qualify, a business generally needs to satisfy several requirements.

1. Meet the Small Business Turnover Threshold

The business must have aggregated annual turnover below $10 million.

Businesses with turnover of $10 million or more are not eligible for this particular small business concession, although other depreciation provisions may apply.

2. Use the Simplified Depreciation Rules

The business must be eligible for and apply the simplified depreciation rules.

These rules provide a framework for calculating deductions on depreciating assets, including the instant asset write-off and the treatment of assets that exceed the immediate deduction threshold.

Businesses should confirm their depreciation method with their accountant, as choosing to use simplified depreciation has implications beyond individual asset purchases.

3. Purchase an Eligible Depreciating Asset

The asset must qualify under the relevant tax rules.

Generally, depreciating assets are items with a limited effective life that are expected to decline in value over time, such as equipment, machinery, computers and certain vehicles.

Not every business expense or capital purchase is a depreciating asset eligible for the concession.

4. Meet the Relevant Cost Threshold

The qualifying cost of each asset must be less than $20,000.

An asset costing exactly 20,000doesnotmeettheless-than-20,000 threshold.

The calculation also needs to account for GST treatment and any additional costs that form part of the asset’s cost.

5. Have the Asset Ready for Business Use

The asset must be first used or installed ready for use for a taxable purpose during the relevant financial year.

For the 2026–27 financial year, this generally means between 1 July 2026 and 30 June 2027.

Simply ordering an asset or paying a deposit does not necessarily establish entitlement to claim the deduction in that financial year.

What Assets Can Businesses Claim Under the $20,000 Instant Asset Write-Off?

The concession can apply to a wide range of depreciating assets used in business operations.

The types of assets that may qualify depend on the nature of the business, how the asset is used and whether it satisfies the relevant tax requirements.

Computers, Technology and Office Equipment

Businesses investing in technology may be able to claim eligible purchases such as desktop computers, laptops, monitors, printers, servers and other office equipment.

For professional services businesses, these investments can support improved efficiency, remote working arrangements, cybersecurity and day-to-day operations.

For example, an accounting practice upgrading several staff computers may be able to claim an immediate deduction for each qualifying asset, provided the relevant requirements are met.

Tools, Machinery and Operational Equipment

Businesses in construction, manufacturing, maintenance and other equipment-dependent industries may benefit from the concession when purchasing qualifying tools and machinery.

Examples may include power tools, workshop equipment, manufacturing machinery and specialised operational equipment.

These purchases can support productivity, reduce downtime and improve a business’s capacity to deliver services.

Furniture and Business Fit-Out Equipment

Certain furniture and equipment purchases may also qualify, including office desks, chairs, shelving and other separately identifiable depreciating assets.

However, businesses should distinguish between eligible depreciating assets and expenditure relating to buildings, structural improvements or capital works, which may be subject to different deduction rules.

Business Vehicles

Some vehicles may qualify for the instant asset write-off where they meet the relevant requirements, including the asset cost threshold.

However, vehicle deductions can be more complex because different rules may apply depending on the type of vehicle, its business-use percentage and relevant motor vehicle depreciation limits.

Businesses considering a vehicle purchase should seek advice before assuming the full purchase cost can be immediately deducted.

New and Second-Hand Equipment

The concession is not limited to brand-new purchases.

Eligible second-hand depreciating assets can also qualify, provided they meet the applicable conditions.

This can be particularly useful for businesses seeking to expand their operations while keeping capital expenditure manageable.

Does the $20,000 Threshold Apply to Each Asset or Total Purchases?

One of the most important features of the instant asset write-off is that the $20,000 threshold applies on a per-asset basis.

This means eligible businesses may be able to claim an immediate deduction for multiple qualifying assets purchased during the same financial year, even when their combined cost exceeds $20,000.

For example, consider a business purchasing the following equipment:

Asset	Cost excluding recoverable GST
Laptop computers	$7,500
Office furniture	$4,800
Printer and scanning equipment	$3,200
Workshop equipment	$12,000
Total investment	$27,500

If these are separate qualifying assets, all relevant conditions are satisfied and the purchases are used entirely for business purposes, the business may be able to claim immediate deductions totalling $27,500.

The combined purchase amount exceeding $20,000 does not automatically prevent the business from accessing the concession.

However, the treatment may differ where items form part of a set or constitute a single depreciating asset. Businesses should not assume that dividing a purchase into separate invoices will make an otherwise ineligible asset qualify.

How Much Tax Can You Save With the Instant Asset Write-Off?

The amount of tax a business may save depends on several factors, including its tax rate, taxable income, business structure and the deductible business-use percentage of the asset.

A common misconception is that purchasing a $15,000 asset under the instant asset write-off means the business receives $15,000 back from the government.

That is not how the concession works.

Instead, the eligible deduction reduces the business’s taxable income.

Example: A $15,000 Equipment Purchase

Consider an eligible company that purchases equipment costing $15,000, excluding recoverable GST, for 100% business use.

Assume the company is subject to a 25% income tax rate and has sufficient taxable income to benefit fully from the deduction.

Calculation	Amount
Eligible equipment cost	$15,000
Immediate tax deduction	$15,000
Assumed company tax rate	25%
Potential reduction in income tax	$3,750
Effective after-tax cost	$11,250

In this simplified example, the $15,000 deduction could reduce the company’s income tax liability by $3,750.

The business has still spent $15,000 to acquire the equipment. The tax deduction reduces the after-tax cost but does not eliminate the original expense.

Actual tax outcomes will depend on the business’s circumstances. For example, a business operating at a loss may not receive an immediate cash tax saving from the deduction.

This is why it is important to assess the commercial value of a purchase rather than making investment decisions based solely on the potential tax benefit.

How Does the Instant Asset Write-Off Affect Business Cash Flow?

One of the primary advantages of the instant asset write-off is the ability to bring forward eligible tax deductions.

Under standard depreciation arrangements, the tax benefit associated with purchasing equipment may be spread over several financial years.

With the instant asset write-off, the deduction can be claimed in the year the asset is first used or installed ready for use, potentially reducing taxable income sooner.

This can help businesses manage the after-tax cost of investing in equipment, particularly when purchases are made as part of a broader growth or operational improvement strategy.

However, there is an important distinction between a tax deduction and available cash.

Purchasing equipment requires a business to fund the investment, either from existing cash reserves or through finance. The tax benefit may not be realised until the relevant tax return is lodged and assessed, or through adjustments to tax instalments where appropriate.

Businesses should therefore consider whether they can comfortably afford the purchase before proceeding.

A useful investment assessment should consider:

Whether the equipment is necessary for current operations or planned growth.
The expected productivity or revenue benefits.
The impact on working capital and cash reserves.
Ongoing operating, maintenance and replacement costs.
Available finance options and repayment obligations.
The timing and value of any potential tax deduction.

A tax concession can improve the financial outcome of a worthwhile investment, but it should not be the sole reason for making a purchase.

Can You Claim the Instant Asset Write-Off on Equipment Purchased Through Finance?

Businesses often use equipment finance to acquire machinery, vehicles, technology and other operational assets without paying the full purchase price upfront.

In some circumstances, assets acquired through financing arrangements may qualify for the instant asset write-off.

However, eligibility depends on the structure of the finance agreement and whether the business is treated as holding the depreciating asset for tax purposes.

For example, the treatment of an asset purchased using a business loan may differ from an asset obtained under an operating lease or certain hire purchase arrangements.

Where a business owns an eligible asset funded through a loan, the relevant depreciation deduction is generally considered separately from the loan repayments.

The principal component of loan repayments is not ordinarily an additional tax deduction for the asset’s cost. Interest and other finance expenses may have separate tax treatment.

Businesses should review their finance agreements with their accountant before assuming an asset qualifies.

Should You Finance Equipment to Take Advantage of the Write-Off?

Equipment finance can be useful when a business needs to preserve working capital while investing in assets that support revenue generation or operational efficiency.

However, financing introduces ongoing repayment commitments that need to be assessed against expected business income.

Before committing to a purchase, businesses should consider the total cost of finance, interest rates, repayment schedules, potential fees and whether the equipment is expected to generate sufficient commercial value.

The instant asset write-off may improve the after-tax cost of the investment, but it does not remove the obligation to repay borrowed funds.

What Happens if an Asset Costs $20,000 or More?

Assets costing $20,000 or more do not qualify for an immediate deduction under the permanent $20,000 instant asset write-off threshold.

However, this does not necessarily mean the business loses the ability to claim depreciation deductions.

Under the small business simplified depreciation rules, qualifying assets that exceed the threshold can generally be allocated to the small business depreciation pool.

The applicable pool rates are generally:

15% in the first income year for newly acquired assets allocated to the pool.
30% in subsequent income years on the relevant pool balance.

For example, if an eligible business purchases machinery costing $30,000, excluding recoverable GST, the asset would not qualify for the immediate $20,000 write-off.

Instead, the machinery would generally be allocated to the small business depreciation pool, with deductions calculated under the applicable pooling rules.

The actual deduction may depend on the asset’s business-use percentage, the existing pool balance and other relevant adjustments.

Businesses should also be aware that special rules can apply to certain assets, including some vehicles and other excluded items.

Is the Instant Asset Write-Off Threshold Inclusive or Exclusive of GST?

The treatment of GST is an important consideration when determining whether an asset falls below the $20,000 threshold.

For businesses registered for GST that are entitled to claim the full GST credit on a purchase, the asset’s cost is generally calculated excluding the recoverable GST amount.

For businesses not registered for GST, the GST component is generally included in the asset’s cost.

Where only part of the GST credit is recoverable, the calculation must reflect the amount that can be claimed.

Example: Purchasing Equipment for $21,450 Including GST

An eligible business purchases equipment for $21,450, including $1,950 in GST.

If the business is registered for GST and entitled to claim the full GST credit, the relevant asset cost for depreciation purposes would generally be $19,500.

Because $19,500 is less than $20,000, the purchase may qualify for the instant asset write-off, provided the other requirements are satisfied.

If the business is not entitled to claim a GST credit, the relevant cost may instead be $21,450, meaning the asset would exceed the instant write-off threshold.

This example highlights why businesses should confirm the correct GST treatment before determining whether a purchase is eligible.

What Are the Most Common Instant Asset Write-Off Mistakes?

Although the concession is designed to simplify deductions for small businesses, errors can occur when purchases are made without considering the relevant requirements.

Assuming Every Purchase Under $20,000 Qualifies

Not all business expenditure is eligible for the instant asset write-off.

The concession generally applies to qualifying depreciating assets. Other expenses, including trading stock, certain capital works and some intangible assets, may be subject to different tax rules.

Claiming the Full Cost of an Asset Used Privately

Where an asset is used for both business and private purposes, the deduction generally needs to reflect the business-use percentage.

For example, if an eligible $10,000 asset is used 80% for business and 20% privately, the immediate deduction may be limited to $8,000.

Businesses should retain appropriate records to support the business-use percentage claimed.

Purchasing an Asset Without Having It Ready for Use

Buying equipment shortly before the end of the financial year does not automatically mean the business can claim the deduction for that year.

The asset must meet the relevant first-use or installed-ready-for-use requirements.

Businesses purchasing machinery or equipment that requires delivery, installation or configuration should consider these timeframes carefully.

Overlooking Additional Asset Costs

The relevant cost of an asset can include more than its advertised purchase price.

Freight, delivery, installation and other amounts required to bring the asset into use may form part of its cost for depreciation purposes.

An asset advertised for $19,500 may exceed the threshold once additional relevant costs are included.

Making Unnecessary Purchases for Tax Reasons

A tax deduction does not make an unnecessary purchase financially worthwhile.

Businesses should assess whether an asset will genuinely improve operations, productivity, customer service or revenue opportunities.

The most effective tax planning supports commercial objectives rather than creating expenses simply to reduce taxable income.

How Should Businesses Plan Asset Purchases in 2026–27?

With the $20,000 instant asset write-off now permanent, eligible businesses have greater certainty when planning equipment and technology investments.

Rather than rushing to purchase assets before an uncertain annual extension deadline, businesses can take a more structured approach to capital expenditure.

Review Existing Equipment and Operational Needs

Start by identifying equipment that is outdated, unreliable or limiting productivity.

Consider whether replacing or upgrading these assets could reduce operating costs, improve efficiency or support additional business activity.

Forecast Cash Flow Before Making Purchases

Review the expected impact of the purchase on cash reserves, operating expenses and upcoming financial commitments.

For businesses experiencing seasonal revenue fluctuations, the timing of an equipment purchase can be particularly important.

Compare Purchasing and Financing Options

Consider whether the business is better positioned to purchase the asset outright or use an appropriate financing arrangement.

The most suitable option will depend on available working capital, borrowing costs and the expected return from the investment.

Confirm the Tax Treatment Before Committing

Speak with your accountant before making significant purchases, particularly where the asset is close to the $20,000 threshold or involves financing, private use or specialised equipment.

Confirming the tax treatment in advance can help avoid unexpected outcomes when preparing the business’s tax return.

Maintain Accurate Records

Keep invoices, finance agreements, proof of purchase, installation details and records supporting business use.

Accurate documentation helps businesses substantiate deductions and maintain reliable asset registers.

Frequently Asked Questions About the $20,000 Instant Asset Write-Off

Is the $20,000 instant asset write-off permanent in Australia?

Yes. The Australian Government legislated the permanent $20,000 instant asset write-off in August 2026, with effect from 1 July 2026. Eligible small businesses can claim immediate deductions for qualifying depreciating assets costing less than $20,000, subject to the applicable requirements.

What is the instant asset write-off limit for 2026–27?

The instant asset write-off threshold for eligible small businesses in the 2026–27 financial year is $20,000 per qualifying asset. The asset must cost less than $20,000 to meet the threshold.

Can I claim more than $20,000 in total?

Yes. The threshold applies to each individual qualifying asset rather than the total amount spent during the financial year. An eligible business may be able to claim deductions for multiple assets where each meets the relevant requirements.

Can I claim a second-hand asset?

Yes. Both new and second-hand depreciating assets can qualify for the instant asset write-off, provided they satisfy the applicable eligibility conditions.

Can sole traders use the instant asset write-off?

Yes. Eligible sole traders may be able to access the concession if they meet the small business requirements and use the simplified depreciation rules. The deductible amount must reflect the asset’s business use.

Does the instant asset write-off apply to vehicles?

Some vehicles may qualify, but eligibility depends on the type of vehicle, its cost, business use and the applicable depreciation rules. Businesses should obtain advice before purchasing a vehicle specifically to access the concession.

Can I claim equipment purchased with a business loan?

Potentially. Equipment purchased using borrowed funds may qualify where the business holds the eligible depreciating asset and satisfies the relevant requirements. The finance structure and tax treatment should be reviewed before claiming a deduction.

Does the instant asset write-off mean I get $20,000 back?

No. The concession provides a tax deduction, not a cash reimbursement. The actual tax benefit depends on the deductible amount, the business’s tax position and its applicable tax rate.

Do I need to purchase the asset before 30 June 2027?

To claim an immediate deduction in the 2026–27 financial year, the asset must generally be first used or installed ready for use for a taxable purpose by 30 June 2027. Purchasing or ordering an asset alone may not be sufficient.

What happens if my business makes a loss?

The deduction may increase a business’s tax loss rather than provide an immediate income tax saving. The treatment and potential future use of that loss depend on the business structure and applicable tax rules.

Make Informed Business Investment Decisions With MKS Group

The permanent $20,000 instant asset write-off provides eligible Australian businesses with greater certainty when planning investments in equipment, technology and other operational assets.

While the concession can deliver valuable tax benefits, the most important consideration is whether an investment supports your business’s broader financial and commercial objectives.

Understanding how an asset purchase affects taxable income, cash flow, financing commitments and future growth can help business owners make more informed decisions.

At MKS Group, we work with businesses to navigate accounting and taxation requirements while supporting informed financial decision-making and long-term business growth.

Whether you’re planning an equipment purchase, reviewing your tax position or considering your next stage of business investment, having the right advice can help you assess the opportunities and understand the financial implications.

Contact MKS Group to discuss your business accounting, tax planning and advisory needs.

Disclaimer: This article provides general information only and does not constitute taxation, financial or legal advice. Eligibility and tax outcomes depend on individual circumstances. Businesses should seek professional advice before making purchasing, financing or taxation decisions.