$20,000 Instant Asset write off Now Law

The Government announced the extension of the $20,000 immediate write off for small businesses prior to the election, however, this only became law in December 2025 (Talk about an early Christmas present).

What this means for you

Small businesses with a turnover of less than $10 million, are now eligible to deduct the full cost of qualified assets costing less than $20,000 that are first used or installed ready for use between 1 July 2025 and 30 June 2026.

Under the measure small businesses with a turnover of less than $10 million, can deduct:

• the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use between 1 July 2025 and 30 June 2026
• an amount included in the second element (cost addition) of eligible depreciating assets cost that they have incurred between 1 July 2025 and 30 June 2026, if they claimed an immediate deduction for the asset under the simplified depreciation rules in a prior income year where the amount is (Refer to Example 1 below):

◊ the first amount of second element cost incurred after the end of the income year in which the asset was written off; and

◊ less than $20,000.

The $20,000 limit under the measures applies on a per asset basis, so small businesses can instantly write off multiple assets.

Assets valued at $20,000 or more will continue to be placed into the small business pool and depreciated at 15% in the first income year and 30% each income year after that. In addition, pool balances under $20,000 at the end of 2025–26 income year can be written off.

Example : purchase of assets and cost additions under the relevant limit

John is a sole trader with an aggregated turnover of less than $10 million. He purchased an excavator for $220,000 for his business and first used it on 20 January 2021. He claimed the cost of the excavator under temporary full expensing in his 2020–21 income year tax return.

On 15 August 2025, John purchased, and installed ready for use, a new bucket for his excavator at a cost of $19,000. He did not have any previous cost additions for the excavator. The bucket is the first addition to the second element of cost for the asset which John had written off in an earlier income year. This means he is able to claim a deduction for its full cost in his 2025–26 income year tax return as it is under the relevant limit of $20,000.

John also purchased a new MIG welder for $4,500 which was delivered ready for use on 12 June 2026. As the cost of the MIG welder was under the relevant limit and he only uses it for his business, he can instantly write off its full cost as a deduction in his 2025–26 income year tax return.

Author

Natasa Briffa