Instant asset write-off — $20,000 threshold for 2025-26 and proposed 2026-27 extension

Current rules for FY2025-26

The instant asset write-off applies for the financial year 2025-26, covering the period from 1 July 2025 to 30 June 2026. To be eligible, assets must cost less than $20,000 and be first used or installed ready for use for a taxable purpose within this period.

The $20,000 limit applies to each individual asset. This means businesses can instantly write off multiple assets, provided each asset meets the cost and usage requirements.

To be eligible for the instant asset write-off, businesses must have aggregated turnover of less than $10 million.

Proposed permanent threshold from 1 July 2026

The Government announced on 12 May 2026, as part of the 2026-27 Budget, a proposal to permanently increase the instant asset write-off threshold to $20,000. This change is intended to take effect from 1 July 2026.

The proposed permanent threshold will apply to small businesses. To be eligible, businesses must have aggregated turnover of less than $10 million.

As of June 2026, this measure is not yet law. Taxpayers should continue to plan based on the assumption that the existing instant asset write-off measure will end on 30 June 2026 until the legislation is enacted.

What 'first used or installed ready for use' means

The ‘first used or installed ready for use’ test determines eligibility for the instant asset write-off. This means the asset must be physically available and ready to be used in the business for a taxable purpose.

Delivery of an asset alone is not sufficient. If installation is required for the asset to be used, it does not qualify until it is installed. Ordering or paying for an asset does not trigger eligibility; the ‘first used or installed ready for use’ test is the key requirement.

This same test applies regardless of whether the asset is being considered under the $20,000 threshold for 2025-26 or the proposed permanent threshold for 2026-27.

Assets over the threshold and the small business pool

Assets costing $20,000 or more are allocated to the small business simplified depreciation pool. This pool is used to calculate depreciation deductions.

Depreciation deductions for assets in the small business pool are 15% in the year of allocation, with 30% deductions applying in subsequent years.

If the closing balance of the small business pool is less than the threshold, excluding the current-year amount, the full balance can be written off. Businesses that previously opted out of simplified depreciation must opt back in for a period of five years if they re-enter.