How the Instant Asset Write Off Works

The Instant Asset Write-Off allows eligible Australian businesses with an aggregated turnover under $10 million to immediately deduct the full cost of eligible new or second-hand assets costing less than $20,000 per asset. The asset must be first used or installed ready for use by June 30, 2026, and used for business purposes. 

Key Features of the Instant Asset Write-Off

• Threshold: Assets must cost less than $20,000 per individual item. You can write off multiple assets if each one is under the limit.

• Eligibility: Generally available to small businesses with an aggregated annual turnover of less than $10 million.

• Asset Type: Both new and second-hand depreciating assets qualify.

• Timing: The asset must be purchased and first used, or installed ready for use, between July 1, 2023, and June 30, 2026.

• Business Use: If an asset is used partly for private purposes, you can only claim the business portion of the cost.

• Exclusions: Capital works, horticultural plants, and intangible assets, like software are not covered. 

How to Claim

• Purchase Asset: Buy a qualifying asset under the $20,000 threshold.

• Install/Use: Ensure it is installed and ready to be used before June 30 of the financial year.

• Deduct: Claim the full business portion cost on your tax return. 

Calculating the Deduction

• Business vs. Private Use: You can only claim the business-use portion of the asset. For example, if a $15,000 laptop is used 80% for business, you claim $12,000.

• GST Treatment:

  • If registered for GST, the $20,000 threshold is calculated excluding GST (net cost).

  • If not registered, the threshold includes the GST-inclusive cost.

• Assets over $20,000: Assets costing $20,000 or more cannot be written off immediately. They must be placed into a small business depreciation pool, where they generally depreciate at 15% in the first year and 30% each year thereafter. 

Key Limits to Watch

• Car Limit: For passenger vehicles, a specific ATO car limit applies ($69,674 for 2024–25; 2025-26 rates may vary). If the car costs more than the IAWO threshold $20,000, you must pool it, and your total depreciation is capped at the car limit.

• Lock-out Rules: The rule preventing businesses from re-entering the simplified depreciation regime for five years after opting out is currently suspended until 30 June 2026. 

Are you considering a specific asset purchase? If you have any questions please contact me paul@congdonfuzi.com.au