$20,000 Instant Asset Write-Off Is Now Permanent: What Australian SMEs Need to Know

Article updated: 11 September 2026.

For years, Australian small businesses have faced the same question approaching the end of each financial year: will the $20,000 instant asset write-off be extended again?

That uncertainty is now over.

The Australian Government has made the $20,000 instant asset write-off permanent from 1 July 2026, giving eligible small businesses greater certainty when planning investment in vehicles, tools, machinery, technology and other business assets.

The change was delivered through the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, which received Royal Assent on 26 August 2026. The legislation permanently extends the $20,000 threshold for eligible small businesses with aggregated annual turnover below $10 million. ^[6], [8]

For business owners, however, the important question is not simply “Can I claim the write-off?”

It is:

“Does buying this asset make commercial sense, and how should I fund it without putting unnecessary pressure on my cash flow?”

That distinction matters.

What is the instant asset write-off?

The instant asset write-off allows eligible businesses using the simplified depreciation rules to claim an immediate deduction for the business portion of the cost of eligible depreciating assets, rather than depreciating that amount over several years.

From 1 July 2026, eligible small businesses with aggregated annual turnover of less than $10 million can immediately deduct eligible assets costing less than $20,000. ^[4], [7]

Importantly, the $20,000 threshold applies per asset, rather than being a $20,000 total annual allowance.

A business could therefore potentially purchase several eligible assets costing less than $20,000 each and claim the immediate deduction for each, subject to satisfying the relevant tax rules. ^[7], [8]

Both new and second-hand assets can potentially qualify. The ATO also makes clear that eligibility depends on factors including aggregated turnover, the cost of the asset and when the asset is first used or installed ready for use. ^[1], [2]

What changed on 1 July 2026?

The biggest change is certainty.

Previously, the $20,000 threshold was repeatedly extended for limited periods. Without another legislative extension, the underlying threshold could have reverted to $1,000.

The 2026–27 Federal Budget changed that direction.

The Government announced that the $20,000 threshold would become permanent from 1 July 2026, with Treasury estimating that the measure would improve small-business cash flow by approximately $890 million over five years. ^[4]

The legislation subsequently passed Parliament, removing the recurring uncertainty surrounding annual extensions. ^[6], [8]

For SMEs, that means asset purchases no longer need to be driven by fear that the concession might disappear at the next EOFY.

That is arguably more important than the write-off itself.

Businesses can now incorporate the concession into longer-term capital expenditure and finance planning.

Who can potentially qualify?

Broadly, the permanent measure applies to eligible small businesses with aggregated annual turnover below $10 million that use the simplified depreciation rules.

The ATO’s framework considers aggregated turnover, including relevant connected entities and affiliates, rather than simply looking at the turnover of one trading entity. ^[1]

For an eligible asset to receive the immediate deduction, its cost must be less than $20,000.

The threshold is tested against the asset’s total cost before adjusting for private use. Deduct any GST credit entitlement when calculating that cost; if you are not registered for GST, include GST. An asset costing exactly $20,000 does not qualify.

The asset must also be first used or installed ready for use for a taxable purpose in the relevant income year. Simply ordering equipment or signing a purchase contract does not necessarily establish the year in which the deduction can be claimed. ^[1]

Businesses should therefore confirm the tax treatment and eligibility of individual purchases with their accountant or registered tax adviser.

What happens if the asset costs $20,000 or more?

An asset does not suddenly become unattractive simply because it exceeds the instant write-off threshold.

Under the simplified depreciation rules, eligible assets costing $20,000 or more can generally be allocated to the small-business pool.

The Government has confirmed that these assets can be depreciated at 15% in the first income year and 30% in subsequent income years under the applicable simplified depreciation arrangements. ^[7]

That distinction is important when making investment decisions.

A $25,000 piece of equipment should not automatically be rejected in favour of a $19,500 alternative simply because the cheaper asset may qualify for an immediate deduction.

The commercial question should remain:

Which asset will produce the best outcome for the business?

Tax treatment should form part of the decision, not drive the entire decision.

A tax deduction is not free equipment

This is perhaps the most important point for business owners.

An instant asset write-off is a tax deduction. It is not a government rebate for the full purchase price of an asset.

If a business spends $18,000 on eligible equipment, it has still spent $18,000.

The deduction may reduce taxable income, subject to the business’s circumstances and applicable tax rules, but the business still needs to fund the purchase.

This is why cash-flow planning remains critical.

An asset purchase may make sense when it helps the business:

• increase productive capacity;
• replace unreliable equipment;
• reduce operating costs;
• improve staff productivity;
• fulfil additional contracts;
• generate additional revenue; or
• address an operational bottleneck.

Buying something purely to obtain a tax deduction can produce the opposite result, particularly if it drains working capital needed for wages, suppliers, tax obligations or unexpected expenses.

Cash versus finance: where the real decision sits

The permanent write-off creates an opportunity for businesses to consider asset purchases more strategically.

Suppose a business needs $18,000 of equipment.

It may have enough cash available to purchase the equipment outright. But using $18,000 of working capital could leave the business exposed if customer payments are delayed, a BAS payment falls due or an unexpected expense arises.

Depending on the asset and business circumstances, financing the purchase may allow the business to preserve more of its working capital while acquiring the productive asset it needs.

Common structures can include:

Chattel mortgage: commonly used for vehicles, machinery and equipment where the business owns the asset while the financier takes security over it.

Hire purchase: another structure that may be suitable for certain vehicles and equipment, depending on the circumstances.

Business loan: funding can also be structured through a business loan where the business purchases and owns the asset.

Finance or operating lease: these can offer different cash-flow characteristics, but ownership and tax treatment can differ materially from an outright purchase or chattel mortgage.

Compare the total interest and fees, required security, repayment schedule and any balloon payment, as well as the cash retained. Finance creates an ongoing repayment commitment.

The appropriate structure depends on the asset, business financial position, cash flow, GST position, intended ownership period and lending requirements.

Businesses should discuss tax treatment with their accountant before choosing a structure purely for tax reasons.

Example: a tradie replacing equipment

For this illustrative example, assume costs are net of any GST credit entitlement, the assets are used wholly for business, and all eligibility requirements are met. Consider a plumbing business that needs to replace several pieces of ageing equipment:

• pipe inspection camera: $8,500;
• specialist power tools: $6,000; and
• site equipment: $4,500.

Each separate eligible asset costs less than $20,000. The tool and site-equipment figures are category totals; the accountant should confirm what constitutes each asset.

Because the instant asset write-off operates on a per-asset basis, each purchase could potentially qualify for an immediate deduction if the business and assets satisfy the relevant requirements. ^[7], [8]

The combined investment is $19,000, but the business owner still needs to decide whether paying $19,000 from cash reserves is sensible.

If the business regularly experiences timing gaps between paying employees and suppliers and receiving customer payments, retaining some working capital may be more valuable than simply paying cash.

That is where finance structure and cash-flow planning need to be considered alongside the tax deduction.

Example: professional services business investing in technology

The same principle applies outside the trades.

A consulting, accounting, legal, medical or other professional-services business might invest in:

• computers and workstations;
• servers and networking equipment;
• audiovisual equipment;
• office technology; or
• other eligible business assets.

The Government itself has highlighted computers for professional services alongside tools for tradies and machinery for manufacturers as examples of assets potentially covered by the permanent measure. ^[8]

Again, the relevant question is not simply whether an item is below $20,000.

The business should consider whether the investment improves capacity, productivity or profitability, and whether paying cash or financing the purchase provides the stronger overall outcome.

The asset must actually be ready for use

Making the write-off permanent removes the previous annual legislative uncertainty, but timing can still matter.

The ATO states that the deduction is claimed in the income year in which an eligible asset is first used or installed ready for use. ^[1]

For example, a business wanting a purchase recognised in a particular financial year should not assume that placing an order before 30 June is sufficient.

Delivery, installation and readiness for use can be relevant.

Businesses contemplating significant EOFY purchases should therefore allow enough time for sourcing the asset, obtaining finance approval, settlement, delivery and installation where required.

Why permanent status changes SME planning

The permanent threshold arguably encourages a healthier approach to capital expenditure.

Instead of businesses rushing to make purchases because a temporary concession might expire on 30 June, they can focus more closely on when the asset is actually needed.

That can improve decisions around:

Cash flow: Is there sufficient working capital after the purchase?

Return on investment: Will the equipment generate revenue or meaningful cost savings?

Finance structure: Should cash be preserved and the asset financed?

Replacement cycle: Is existing equipment becoming expensive to maintain?

Capacity: Could the new asset allow the business to take on more work?

Tax planning: How does the purchase fit with the accountant’s expectations for taxable income?

This is where collaboration between the business owner, accountant and finance broker can be particularly valuable.

The accountant can assess the tax implications.

The finance broker can assess available funding structures and borrowing options.

The business owner can then make the investment decision with a clearer picture of both the tax and cash-flow consequences.

The broader cash-flow environment is also changing

The instant asset write-off is only one of several changes affecting Australian businesses.

The 2026–27 Budget also introduced or announced measures including tax loss carry-back arrangements and greater PAYG instalment flexibility. ^[3], [4]

For many businesses, these changes arrive alongside other pressures on working capital.

That makes cash-flow forecasting increasingly important.

A business considering new equipment should therefore look beyond whether it can obtain finance today and consider what its cash position may look like over the next three, six and twelve months.

Before purchasing an asset, ask these five questions

Before committing to a vehicle, machine, technology upgrade or other significant business asset, consider:

1. Do we actually need the asset now?
2. What measurable benefit should it produce?
3. What happens to our working capital if we pay cash?
4. Would financing the asset produce a stronger cash-flow position?
5. Has our accountant confirmed the expected tax treatment?

If those questions are answered before the purchase, the instant asset write-off becomes part of a broader business strategy rather than simply an EOFY tax tactic.

How JBF Solutions can help

At JBF Solutions, we help Australian business owners look beyond the headline interest rate and consider how finance fits within the broader financial position of the business.

Depending on your circumstances, this can include reviewing options for:

• equipment and machinery finance;
• vehicle and fleet finance;
• chattel mortgages;
• commercial and business loans;
• working-capital facilities; and
• broader cash-flow and business finance solutions.

The objective is not simply to obtain finance.

It is to structure finance around the needs, cash flow and future plans of the business.

If you are considering purchasing new equipment, replacing a vehicle or investing in assets to expand your business, speak with your accountant about the tax implications and JBF Solutions about the funding options available to you.

Your accountant can help determine what you can claim. We can help determine how to fund it.