Instant Asset Write-Off: Which Finance Structures Qualify and How to Claim It
The $20,000 instant asset write-off (IAWO) allows eligible small businesses to claim the full cost of a qualifying asset as an immediate tax deduction in the year it's purchased and first used, instead of depreciating it over several years. For 2025–26, the threshold is $20,000 per asset (excluding GST) for businesses with aggregated annual turnover under $10 million. The scheme is confirmed until 30 June 2026. Critically, the finance structure you use to buy the asset determines whether you can claim it.
What Is the Instant Asset Write-Off?
Normally when a business buys a piece of equipment, it can't claim the full cost as a deduction in the year of purchase. Instead it has to 'depreciate' the asset, claiming a small portion of the cost each year over the asset's useful life. That process drags out the tax benefit for years.
The instant asset write-off changes that. If your asset costs less than $20,000 and you're an eligible small business, you can claim the entire business-use portion as a deduction in the financial year the asset is first used or installed ready for use. Less taxable income. Lower tax bill. Better cash flow.
The scheme was extended annually from 2015 through to 2026 and has now been permanently legislated from 1 July 2026 following the 2026-27 Federal Budget. The threshold is $20,000 per asset with no sunset date.
CONFIRMED → The $20,000 instant asset write-off for 2025–26 passed the Senate in November 2025 and is now law. It applies to assets first used or installed ready for use between 1 July 2025 and 30 June 2026. (Source: ATO)
Who Is Eligible?
Two sets of rules apply, one for your business, one for the asset.
Business eligibility:
Your business must be carrying on a business in the 2025–26 income year
Your aggregated annual turnover must be less than $10 million
You must use the simplified depreciation rules (most small businesses do, your accountant can confirm)
The business can be structured as a sole trader, partnership, company or trust
Asset eligibility:
The asset must cost less than $20,000 (excluding GST, if you're GST-registered)
It must be first used, or installed ready for use, between 1 July 2025 and 30 June 2026
Both new and second-hand assets qualify
The asset must be used for a taxable (business) purpose
The $20,000 limit applies per asset. You can write off multiple assets in the same year
CAR LIMIT NOTE → For vehicles, the ATO's car cost limit applies. For 2025–26 the car limit is $69,674 (including GST). This caps the depreciation deduction you can claim on a car, but the $20,000 IAWO threshold still applies to the portion below that limit. Speak to your accountant about vehicle-specific rules.
What Assets Qualify?
A wide range of business assets qualify, including:
Vehicles, work utes, vans, cars, motorcycles (subject to car limit)
Tools and equipment, power tools, hand tools, testing equipment
Machinery, compressors, concrete mixers, generators, pumps
IT equipment, computers, laptops, tablets, printers, monitors
Office furniture and fit-out items (below the threshold)
Agricultural equipment, quad bikes, small machinery, irrigation equipment
Medical and health equipment, for allied health practitioners
Assets that do NOT qualify include: trading stock, assets used for private purposes (or the private-use portion), leased assets (see below), and assets that are not depreciating assets for tax purposes.
The Finance Trap Most SMEs Don't Know About
This is the single most important thing to understand if you're financing an asset. The type of loan you use determines whether you can claim the instant asset write-off.
| Finance structure | IAWO eligible? | Why |
|---|---|---|
| Chattel mortgage | YES | You own the asset from day one — it's in your name. You can claim the write-off. |
| Commercial hire purchase | YES | Treated as a purchase for tax purposes — eligible for the write-off. |
| Outright cash purchase | YES | You own it outright — fully eligible. |
| Finance lease | NO | The lender owns the asset during the lease. You cannot claim the write-off — only deduct lease payments. |
| Operating lease / rental | NO | Same reason — the lender or lessor owns the asset, not you. |
CRITICAL → If your dealer or equipment supplier's finance company puts you into a lease without explaining this, you lose the write-off. This is one of the most common and costly mistakes SMEs make at EOFY. Always confirm the finance structure before signing.
What Happens to Assets That Cost $20,000 or More?
Assets at or above $20,000 cannot be immediately written off under the IAWO. Instead they go into the small business depreciation pool:
15% depreciation in the first income year
30% depreciation in each following income year
This still provides a tax benefit over time, just not an immediate full deduction. If your asset costs slightly more than $20,000, it may be worth discussing with your accountant whether structuring the purchase differently (for example, splitting accessories or add-ons as separate assets) could bring individual items under the threshold.
The Timing Rule, Why 30 June Matters More Than You Think
To claim the write-off in your FY26 return, the asset must be first used OR installed ready for use before 30 June 2026. Ordering before 30 June isn't enough if the asset doesn't arrive and become usable until July.
This is particularly important for:
Custom-order equipment with long lead times
Assets requiring installation or commissioning
Vehicles ordered but not yet delivered
PRACTICAL ADVICE → If you're planning a purchase to claim the EOFY write-off, start the finance application now. Equipment finance through a broker can settle in 3–7 business days. Bank applications take longer. Waiting until the last week of June is a risk, allow at least 2–3 weeks from application to settlement.
How the Write-Off Works in Practice, a Real Example:
| Scenario | Detail |
|---|---|
| Business | Plumbing sole trader, $450K annual turnover, GST registered |
| Asset | Pipe inspection camera, $8,500 (excluding GST) |
| Finance structure | Chattel mortgage |
| GST refund (next BAS) | $850 — claimed upfront on the next BAS |
| IAWO deduction (FY26) | $8,500 — full cost deducted in FY26 tax return |
| Tax saving (at 25% rate) | Approximately $2,125, plus the $850 GST refund |
| Effective net cost | $8,500 minus ~$2,975 in tax benefits = effectively $5,525 net cost for an $8,500 asset |
Figures are illustrative. Your actual tax saving depends on your taxable income, business structure and tax rate. Always confirm with your accountant.
Frequently asked questions:
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Yes, but only if the finance structure is a chattel mortgage or commercial hire purchase. Under these structures, you own the asset and can claim the write-off. If the asset is financed under a lease, the lender owns it and you cannot claim the IAWO.
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Per asset. You can write off multiple assets in the same financial year, as long as each individual asset costs less than $20,000 (excluding GST if you're GST-registered). There is no cap on the total dollar amount you can claim across multiple assets.
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From 1 July 2026, the $20,000 threshold is permanent following the 2026-27 Federal Budget. Small businesses can now plan asset purchases with confidence, knowing the write-off will be available every financial year without needing annual confirmation.
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You can finance it, as long as you use a chattel mortgage or hire purchase structure. The key requirement is that you own the asset, not the lender. The full cost of the asset (not just the deposit or repayments paid) is what you claim as the write-off.
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Yes. The 2025–26 scheme covers assets first used or installed ready for use between 1 July 2025 and 30 June 2026. You claim it in your FY26 tax return (lodged after 30 June 2026). If you purchased the asset in the first half of FY26, you are fully eligible as long as you meet the other criteria.
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Both. Your accountant advises on whether you're eligible and what you can claim. A finance broker ensures the loan structure (chattel mortgage, not a lease) is set up correctly so the write-off is actually available to you. Getting the finance structure wrong is the most common mistake, and it's irreversible once the contract is signed.
Make sure your next asset purchase is structured correctly.
Book a free call with Cameron. He can confirm whether your planned purchase qualifies and arrange the right finance structure before EOFY.
