Small business instant asset write-off – what you need to know

As part of the 2025 Federal Budget, the government announced an increase to the small business instant asset write-off threshold, designed to provide continued support to small businesses investing in equipment and assets.

The Bill proposing this change under the Income Tax (Transitional Provisions) Act 1997 has now passed Parliament and is awaiting Royal Assent. Once enacted, the changes will allow eligible small businesses to immediately deduct the cost of certain assets, rather than depreciating them over time.

What is changing?

The proposed amendments increase the instant asset write-off threshold to $20,000 per asset. This means eligible small businesses can immediately deduct the business portion of qualifying assets that cost less than $20,000.

Importantly, the threshold applies per asset, allowing businesses to claim multiple asset purchases, provided each individual asset is below the $20,000 limit.

Eligibility criteria

To access the proposed small business instant asset write-off, all of the following conditions must be met:

• The asset is first installed or ready for use between 1 July 2025 and 30 June 2026

• The asset costs less than $20,000

• The business has an aggregated annual turnover of less than $10 million

What assets are covered?

Eligible depreciating assets can be written off immediately, including:

Second element costs

Small business entities may also immediately deduct amounts included in the second element of an asset’s cost, provided the eligibility criteria are met. These costs can include:

• transport and delivery

• installation

• improvements made to the asset

Low-value asset pools

If the closing balance of the general small business pool is less than $20,000 at the end of the income year, the entire balance may be deductible.

For this purpose, the pool balance is determined before calculating any depreciation deductions for the year.

What this means for the 2025–26 year

If the Bill receives Royal Assent, the instant asset write-off will apply to assets you:

• purchase

• start to hold

• or have installed and ready for use

between 1 July 2025 and 30 June 2026, provided the business portion of the asset cost is below $20,000.

This deduction is already available for the 2024–25 income year and is expected to continue for the 2025–26 income tax return once the legislation is finalised.

Simplified depreciation rules

The amendments also extend the deferral of the five-year lock-out rule for the small business simplified depreciation system until 30 June 2026. This means businesses that opt out of simplified depreciation can still re-enter the system before that date if circumstances change.

Need advice before purchasing assets?

While the instant asset write-off can provide valuable tax benefits, timing, eligibility, and business use all matter. It’s important to consider how asset purchases fit within your broader cash flow and tax position.

If you have questions about the small business instant asset write-off or how these changes apply to your business, please feel free to contact our office. We’re here to help you make informed decisions.