Instant Asset Write-Off: $20k Closes 30 June 2026

TL;DR

For the 2025-26 income year, small businesses with aggregated turnover under $10 million can immediately deduct the full cost of business-use assets up to $20,000 under the Instant Asset Write-Off (IAWO). The asset must be first used or installed ready for use between 1 July 2025 and 30 June 2026 to qualify.

From 1 July 2026, the threshold is legislated to revert to $1,000. That is a 95% drop in the threshold — and unless a Federal Budget extends it (which has happened repeatedly in recent years), the practical effect from 1 July 2026 onwards is that any single asset over $1,000 must be added to the small business depreciation pool and depreciated over multiple years rather than fully deducted in year 1.

The window matters because:

Cash-flow vs deduction timing. A $19,500 asset bought in May 2026 generates $19,500 of immediate deduction. The same asset bought in August 2026 (under the legislated reversion) generates only 15% of $19,500 = $2,925 in year 1, with the balance pooled and depreciated at 30% diminishing value across following years.
At a 25% small-business company tax rate, that timing difference is roughly $4,144 of tax saved this year vs $731 of tax saved this year — a $3,413 cash-flow swing.
The per-asset $20,000 limit means you can buy multiple eligible assets in the same year. A small construction firm might buy three eligible items at $18,000 each before 30 June 2026 and deduct $54,000 immediately.

The Instant Asset Write-Off Calculator handles the FY2025-26 threshold, GST treatment and the small-business pooling rules.

How the Instant Asset Write-Off works

The IAWO is part of the Simplified Depreciation Rules in Subdivision 328-D of the Income Tax Assessment Act 1997. Eligibility:

Aggregated turnover under $10 million in the year of purchase (this is aggregated across related entities, not a single business's turnover).
The business must use the simplified depreciation rules — there is an opt-in/opt-out election.
The asset must be a business-use depreciating asset, not a stock-in-trade (something you intend to sell) and not a leasehold improvement to someone else's premises.
The asset must be first used or installed ready for use within the eligible window.
The cost (excluding GST for GST-registered businesses) must be under the threshold (currently $20,000).

When eligible, the entire cost is deducted in the year the asset is first used or installed. No depreciation schedule, no apportionment over years, no balancing adjustment when later sold.

What "first used or installed ready for use" actually means

This phrase is the source of more disputes with the ATO than any other line in the IAWO rules. The asset must be:

Physically present at the business (or accessible to the business — a vehicle on the dealer's lot does not count).
Capable of being used for its intended business purpose (a forklift requiring a 2-week installation is not "ready" until installed).
Either used in the business OR ready to be used. A spare laptop sitting in a sealed box on a desk, networked and provisioned, qualifies even if no one has yet logged in.

Practical implications:

A new ute ordered in May 2026 with delivery in August 2026 does not qualify for the FY2025-26 IAWO. The "first use" date is August.
A piece of machinery delivered on 28 June 2026 but waiting for an electrician to commission it on 5 July 2026 is first used or installed ready on 5 July — so it falls into FY2026-27 and the $1,000 threshold.
A computer bought online on 25 June 2026, delivered on 27 June, unboxed and powered on 28 June, qualifies. Keep the email receipts and a contemporaneous note of the unboxing date.

When close to the 30 June cutoff, document the first-use date carefully. Insist on supplier invoices dated before 30 June and evidence of physical receipt and use. The ATO has audited IAWO claims based on supplier emails, courier tracking records and accountant working papers; the threshold is taken seriously.

The cliff at 1 July 2026

Without a budget extension, the threshold drops to $1,000 from 1 July 2026. The effect on a typical small business:

A $4,500 office computer bought in June 2026 is immediately deductible.
The same purchase in August 2026 is added to the small business pool and depreciated at 15% in year 1 (the first-year rate for new pool additions) and 30% diminishing value in subsequent years.

That means roughly $675 of deduction in year 1 instead of $4,500 — a deferral of about $3,825 of deduction into future years. At a 25% company tax rate, that is $956 of tax saving deferred.

The reversion has been "scheduled" to happen multiple times over the past decade, only for each year's Federal Budget to extend the threshold. There is no guarantee the May 2026 Budget will extend again. Treat the legislated $1,000 as the planning baseline; any extension is an upside surprise.

Aggregated turnover — the trap that hits growing businesses

Aggregated turnover is the combined turnover of the business plus all connected entities and affiliates. For a sole trader running two ABNs, this is straightforward. For more complex structures:

A husband-and-wife partnership owning two adjacent restaurants must aggregate.
A family trust with three operating companies underneath aggregates all three.
A franchisor and a franchisee at arm's length do not aggregate.

If aggregated turnover crosses $10 million in either the current year or the previous year, the business loses access to IAWO and falls back to the standard depreciation rules. This is why some growing businesses time the purchase of major assets before the year their aggregated turnover ticks over.

Official source

ATO — Simplified depreciation rules — ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/depreciation-and-capital-expenses-and-allowances
ATO — Instant Asset Write-Off — same parent page, dedicated landing.
Treasury — Small Business Energy Incentive and Instant Asset Write-Off Bills — treasury.gov.au.

The ATO's Simplified depreciation rules page is the operational reference. Treasury is where the Bills are first announced; once enacted, the ATO updates the simplified depreciation page within days.

Worked examples

The numbers below assume a small business with aggregated turnover under $10 million using simplified depreciation, GST-registered, and a 25% small-business company tax rate. Costs exclude GST.

Example 1 — Tradie buys a ute (just under the threshold)

Vehicle cost (excluding GST): $19,800 (a 4WD twin-cab utility for an electrician)
Date of first use: 15 May 2026
Business use percentage: 100%
Aggregated turnover: $1.2 million
Tax structure: company at 25%

Eligible because the cost is under the $20,000 threshold and first use was before 30 June 2026. Full $19,800 deductible in FY2025-26.

Tax saving: $19,800 × 25% = $4,950 in year 1.

Compare to the same purchase made on 15 August 2026 under the reverted $1,000 threshold:

Pooled cost: $19,800.
Year 1 deduction (15% first-year rate): $2,970.
Year 1 tax saving: $2,970 × 25% = $742.50.

The pre-30 June timing saves the tradie roughly $4,200 of cash this year. The remaining deduction is recovered over years 2 onwards at 30% diminishing value, but the cash flow advantage of the immediate deduction is significant for a small business managing working capital.

The rule of thumb: if you were going to buy the asset anyway in the next 6 months and you have the cash flow to take delivery before 30 June 2026, the IAWO timing is worth roughly 20-25% of the asset's cost in cash flow advantage at most small-business marginal rates.

Example 2 — Multiple assets to maximise the threshold

The IAWO is per asset, not per year. A single business can buy multiple eligible items in the same year.

Florist, GST-registered, aggregated turnover $700,000
Buys: $18,500 walk-in chiller (15 March 2026), $19,200 delivery van (10 April 2026), $4,800 commercial mixer (5 May 2026)
All assets installed ready for use within FY2025-26
All three under the $20,000 per-asset threshold

Total deduction in FY2025-26: $18,500 + $19,200 + $4,800 = $42,500.

Tax saving at 25%: $10,625 in year 1.

This is the strategy that local press calls "stocking up before 30 June". It is fully legitimate provided:

Each asset is genuinely under the $20,000 threshold (no part-payments structured to dodge the limit).
Each asset is genuinely used in the business by 30 June 2026.
Aggregated turnover stays under $10 million.

The mistake to avoid: do not buy assets you do not actually need. The cash-flow benefit is the deduction's time-value, not the asset's cost. A $20,000 asset you do not use returns $5,000 in tax saving but costs $15,000 net — never a good trade-off.

Example 3 — Asset just over the threshold

A printing business is considering a $24,000 large-format printer. It does not qualify for the IAWO ($20,000 limit), so the entire $24,000 is added to the small business pool.

Year 1 pool deduction (15% first-year rate): $24,000 × 15% = $3,600.
Year 2 deduction (30% diminishing value on opening pool balance after year 1 = $20,400): $6,120.
Year 3 deduction: $4,284. And so on.

Year 1 tax saving at 25%: $3,600 × 25% = $900.

Compare buying two cheaper printers at $11,000 each instead. Each is under the $20,000 threshold and immediately deductible.

Total deduction: $22,000.
Year 1 tax saving: $5,500.

The cash-flow difference is $4,600 in year 1. Whether buying two smaller printers is operationally sensible is a separate question — the tax answer alone is not enough. But if the operational requirement could be met with two smaller assets, the IAWO threshold is a genuine consideration.

For larger assets (over $20,000) that cannot be split, the small business pool is still attractive — the 15% first-year rate plus 30% diminishing value is faster than the standard depreciation schedule for most asset classes. The Instant Asset Write-Off Calculator compares both paths.

Common pitfalls

Confusing "purchased" with "first used or installed ready for use". It is the latter that determines the year of deduction. A receipted purchase in June with delivery and installation in July counts as next year's deduction.
Forgetting GST. For a GST-registered business, the threshold and deduction are based on the GST-exclusive cost. A $22,000 invoice ($20,000 + $2,000 GST) is just under the $20,000 threshold and qualifies. A $21,500 invoice including GST ($19,545 ex-GST) also qualifies. Non-registered or input-taxed businesses use the GST-inclusive cost.
Treating part-payments as triggering deduction. A 50% deposit paid in May 2026 with the remaining 50% on delivery in September 2026 does not qualify for FY2025-26 IAWO. The first-use date governs, not the payment date.
Mixing up business-use assets with home-office assets. A laptop used 70% for business and 30% personal can claim 70% of the cost under IAWO (so $14,000 of a $20,000 laptop is the eligible deduction; the remaining $6,000 is private and non-deductible). Not all of the cost is automatically deductible.
Second-hand assets. Generally eligible for IAWO if otherwise compliant — but not for the Backing Business Investment uplift or the Temporary Full Expensing historical schemes. The IAWO does not require the asset to be new.
Vehicle car limit. The depreciation cost of a passenger car is capped at the car limit ($69,674 for FY2025-26 — indexed annually). For an IAWO claim, this is moot at the $20,000 level. But when the threshold reverts to $1,000, the pooled depreciation also caps at the car limit. Vans, light trucks and commercial utes are not subject to the car limit.
Assuming the threshold will be extended again. It might be. It might not be. Plan for the legislated $1,000 from 1 July 2026 and treat any extension announced in the May 2026 Budget as a bonus. Major capital expenditure decisions should not be timed on a hoped-for legislative change.
Selling an IAWO asset for more than written-down value. When you sell or scrap an asset that was previously fully written off, the proceeds are immediately assessable income. A $18,000 asset fully deducted that you sell for $7,000 a year later generates $7,000 of assessable income. This is the balancing adjustment and many small business owners forget it.

How the small-business pool actually works

When an asset is over the $20,000 IAWO threshold, it is added to the general small business pool. The pool is depreciated as a single line item, with these rules:

Year 1 (the year the asset is added): 15% of cost.
Year 2 onwards: 30% diminishing value on the opening pool balance.
Pool balance under $20,000 at year-end: the entire pool is written off in that year.

The "pool balance under $20,000 at year-end" rule is the cherry on top — if your pool runs down to (say) $15,000 by year 4, the whole $15,000 is deducted in that year. This is why the simplified depreciation rules tend to outperform the standard rules for small business over a multi-year window.

If you opt out of simplified depreciation, you cannot opt back in for 5 years. This is an important strategic decision, not just an accounting tick-box. Most small businesses with aggregated turnover under $10 million are better off staying in the simplified rules; the exception is businesses with very long-life assets (commercial buildings, major industrial machinery) where the standard depreciation schedules are sometimes more favourable.

Energy and EV upside

Two related concessions may overlap with IAWO planning:

Small Business Energy Incentive — for FY2023-24 only, businesses with turnover under $50 million could claim an extra 20% deduction on energy-efficient assets up to a $20,000 cap (i.e. up to $100,000 of asset cost). This expired on 30 June 2024 and has not been renewed.
FBT exemption for electric vehicles — provided to employers buying EVs for employee use. Combined with a novated lease, the FBT exemption can produce a 5-figure annual saving for the employee. The FBT Novated Lease Calculator and the Novated Lease EV Calculator cover the mechanic.

A common 2025-26 strategy: buy a sub-$20,000 charging system or solar inverter for the business and lease an EV for an employee — claiming IAWO on the charger plus the FBT exemption on the EV. The two concessions stack cleanly because the IAWO sits in the income tax assessment and the FBT exemption sits in the FBT assessment.

What sits outside IAWO entirely

A handful of assets are excluded from IAWO regardless of cost:

Assets leased out to others (the leasing of equipment is the business itself).
Capital works for buildings (separately deductible under Division 43 of the Income Tax Assessment Act, at 2.5% per year).
Horticultural plants and grapevines (separately deductible under specific schedules).
Software development for in-house use (the software development pool governs).
Intangible assets like trademarks, copyright and goodwill (specific cost-base treatment).

If any of these are part of your planned spend, the IAWO is not the relevant tool — talk to a registered tax agent about the right schedule.

A history of the IAWO threshold

For context on why the cliff matters this time:

Period	Threshold	Eligibility
Pre-2015	$1,000	Standard simplified depreciation
May 2015 – 30 June 2017	$20,000	Small business under $2M turnover
1 July 2017 – 28 Jan 2019	$20,000 (extended)	Small business under $10M
29 Jan 2019 – 1 Apr 2019	$25,000	Small business under $10M
2 Apr 2019 – 11 Mar 2020	$30,000	Small business under $50M
12 Mar 2020 – 6 Oct 2020	$150,000	Aggregated turnover under $500M
7 Oct 2020 – 30 June 2023	Unlimited (Temporary Full Expensing)	Aggregated turnover under $5B
1 July 2023 – 30 June 2024	$20,000	Aggregated turnover under $10M
1 July 2024 – 30 June 2026	$20,000 (extended each Budget)	Aggregated turnover under $10M
From 1 July 2026	$1,000 (legislated)	Aggregated turnover under $10M

The pattern is repeated extension. Small business owners who waited for "the Budget extension" got it every year from 2015 to 2024. But the threshold has also been allowed to lapse once before (briefly mid-2017) and the Treasury costing of perpetual extension has tightened. Plan for the legislated number; treat extension as upside.

What to do before 30 June 2026

If you are running a small business with aggregated turnover under $10 million, here are the practical steps to take in the next 6 weeks of the financial year:

List the assets you need. Anything you would buy in the next 12 months that costs under $20,000 (excluding GST) is a candidate.
Order with delivery before 30 June. Large items often have lead times. Order in early-to-mid June at the latest to be confident of delivery.
Document first-use date. Photograph the asset in place, record the date, save the supplier invoice and delivery confirmation.
Talk to your tax agent. The decision to opt-in to simplified depreciation is per-year; some businesses are better off staying on the standard rules. Get specific advice.
Plan for FY2026-27 differently. From 1 July 2026 the planning shifts to small-business pool optimisation rather than threshold timing.

Related calculators

Instant Asset Write-Off Calculator — model the FY2025-26 immediate deduction vs the FY2026-27 pooling.
Property Depreciation Calculator — for capital works on commercial premises that fall outside IAWO.
FBT Novated Lease Calculator — vehicles for employee use, where the FBT exemption interacts with employer purchase planning.
Novated Lease EV Calculator — EV-specific FBT exemption mechanics.

This article is general information based on the legislated FY2025-26 IAWO settings and the ATO documents linked above. It is not personal tax advice; talk to a registered tax agent for your business's specific circumstances. Federal Budgets sometimes adjust the threshold mid-year — check the Updated date at the top of this page for the version you are reading.

Instant Asset Write-Off: $20k Closes 30 June 2026 — Why Timing Matters