Small Business Tax Incentives FY2025-26: Instant Asset Write-Off and Concessions

$20,000 instant asset write-off

Small businesses with aggregated annual turnover under $10 million are eligible for an instant asset write-off for the FY2025-26 period (year ended 30 June 2026). This allows for the immediate deduction of the cost of eligible depreciating assets first used or installed ready for use between 1 July 2025 and 30 June 2026, provided the cost of each asset is less than $20,000. Instant asset write-off 2025-26 2026-27

The $20,000 threshold applies individually to each asset. This means businesses can claim the immediate deduction for multiple assets, as long as each asset’s cost is below this amount. The $20,000 instant asset write-off has been extended on a year-by-year basis through successive Federal Budgets.

Assets costing $20,000 or more are not eligible for the instant asset write-off and must be depreciated using the small business pooling rules, which allow for a 15% depreciation rate in the year of purchase and 30% in subsequent years. The 2026-27 Federal Budget proposes to extend this incentive for a further year. Instant asset write-off 2025-26 2026-27

Small business income tax offset

Individual taxpayers who operate a small business as a sole trader or have a partnership share of net small business income may be eligible for the small business income tax offset. This offset is available under Subdivision 328-F of the Income Tax Assessment Act 1997.

The offset is calculated as 16% of the tax payable on net small business income. The maximum offset amount is $1,000 per individual per income year.

Eligibility for this offset requires operating a small business with aggregated turnover under $5 million. The offset is non-refundable and can be claimed in conjunction with other available tax concessions.

Simplified depreciation and other concessions

Small businesses with aggregated turnover below $10 million are eligible to utilise the simplified depreciation rules outlined in Subdivision 328-D of the Income Tax Assessment Act 1997. These rules allow for assets exceeding the instant asset write-off threshold to be pooled and depreciated; the depreciation rate is 15% in the year the asset is first used, followed by 30% in subsequent years.

Beyond depreciation, small businesses can also benefit from simplified trading stock rules, prepayments concessions, and PAYG instalment concessions. These concessions are designed to ease the administrative burden and improve cash flow for eligible businesses.

Certain start-up expenses are deductible immediately, as detailed in section 40-880 of the Income Tax Assessment Act 1997. Furthermore, companies meeting specific criteria—aggregated turnover under $50 million and at least 80% passive income test compliance—may be eligible for a company tax rate of 25%.

Small business CGT concessions

Small business capital gains tax (CGT) concessions, outlined in Division 152 of the Income Tax Assessment Act 1997, can significantly reduce or even eliminate CGT obligations when disposing of business assets. Four key concessions are available: a 15-year exemption, a 50% active asset reduction, a retirement exemption (with a lifetime cap of $500,000), and a small business rollover allowing 15 months to acquire a replacement asset.

To be eligible for these concessions, a taxpayer must meet the definition of a small business entity. This generally means having aggregated turnover under $2 million, or passing the maximum net asset value test, which is set at $6 million.

These concessions are particularly valuable for business owners planning to sell their business or transition out of partnership or company structures. Additional conditions apply to each concession, and these must be carefully considered to ensure eligibility.