Why the $20,000 Instant Asset Write-Off Matters Right Now

If you're a tradie, builder, sparkie, mechanic or run any small business under the $10 million turnover threshold, the $20,000 instant asset write-off is one of the most useful tax measures available to you in the 2025–26 financial year. It lets you immediately deduct the business portion of eligible assets costing less than $20,000, instead of depreciating them slowly over years. The catch: this extension is only legislated until 30 June 2026, and from 1 July 2026 the threshold is scheduled to drop back to just $1,000 unless the government extends it again. With only weeks to go, this is the window to plan your purchases properly.

What Is the Instant Asset Write-Off?

The instant asset write-off (IAWO) lets eligible small businesses claim an immediate tax deduction for the full business-use portion of an asset, in the same income year the asset is first used or installed ready for use. Rather than depreciating a $15,000 piece of equipment over five or more years, you can claim the entire $15,000 deduction upfront, which improves cash flow in the current financial year and reduces your taxable income now.

On 4 April 2025, the Australian Government announced an extension of the $20,000 threshold for a further 12 months, and Parliament passed the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025 in November 2025 to make it law. The measure now formally applies to eligible assets first used or installed ready for use between 1 July 2025 and 30 June 2026.

Who Is Eligible for the $20,000 Instant Asset Write-Off?

To qualify for the instant asset write-off in 2025–26, your business needs to meet all of the following conditions:

  • Aggregated annual turnover under $10 million in either the previous income year or the current year. This includes the turnover of any connected or affiliated entities.
  • You elect to use the simplified depreciation rules for the 2025–26 income year. This is a key requirement that's often overlooked. If you opt out of simplified depreciation, you lose access to the instant write-off entirely.
  • The asset costs less than $20,000. If you're registered for GST, this is the GST-exclusive price. If you're not registered for GST, the threshold includes GST.
  • The asset is first used or installed ready for use for a taxable business purpose between 1 July 2025 and 30 June 2026. Ordering an asset doesn't count, it has to actually be installed and ready for use before the deadline.

Importantly, the $20,000 limit applies per asset, not in total. You can write off multiple eligible assets in the same income year as long as each individual asset costs less than $20,000. So a sparkie buying a $4,500 generator, a $12,000 ute fit-out and a $3,000 set of premium power tools could potentially claim each item instantly.

What Counts as an Eligible Asset?

The instant asset write-off applies to a wide range of business equipment, both new and second-hand. For trade-based businesses, eligible assets typically include:

  • Power tool kits and combo kits
  • Cordless drills, impact drivers, grinders, saws and rotary hammers
  • Air compressors and pneumatic tools
  • Welders, plasma cutters and metalworking equipment
  • Generators and portable power equipment
  • Ladders, scaffolding and access equipment
  • Concrete mixers, levels, lasers and surveying gear
  • Tool storage such as tool boxes, roll cabs and site boxes
  • Automotive tools including hoists, jacks and diagnostic gear
  • Outdoor power equipment such as mowers, blowers and chainsaws
  • Computers, tablets, software and POS systems used in the business

Both new and used assets qualify, provided they meet the eligibility criteria and you have proper records to substantiate the claim. Keep your tax invoices, bank statements and asset registers in order, this is non-negotiable if the ATO ever asks questions.

What Happens to Assets Over $20,000?

Assets costing $20,000 or more can't be immediately written off, but they don't disappear from your deductions. Instead, they go into the small business general pool and depreciate at:

  • 15% in the first income year
  • 30% in each income year after that

There's also a useful bonus rule: if your small business pool balance is under $20,000 at the end of the 2025–26 income year, you can write off the entire pool balance in that year. That's worth planning for if your pool is sitting at a low level heading into 30 June.

Second Element (Cost Addition) Deductions

If you previously wrote off an asset under the simplified depreciation rules and then spent money improving or adding to it in 2025–26, you may also claim an immediate deduction for that additional cost, provided:

  • The improvement cost is the first second-element cost incurred after the asset was written off
  • The amount is less than $20,000
  • The cost was incurred between 1 July 2025 and 30 June 2026

This is useful for tradies who've upgraded an existing tool, vehicle fit-out or piece of equipment they previously claimed in full.

Why You Need to Act Before 30 June 2026

The current $20,000 threshold is only legislated for 2025–26. From 1 July 2026, the threshold reverts to $1,000 unless the government legislates another extension. The Treasury has made no commitment to a permanent change, so realistically you should plan on the assumption that this is the last 20K window for the foreseeable future.

Practically, that means any tools or equipment you've been putting off buying should be on the priority list right now. The asset must be installed and ready for use before 30 June 2026, not just ordered. With supply lead times on bigger items like welders, compressors, generators and trade vehicles, leaving it until the last week of June is a risk.

How to Maximise Your Instant Asset Write-Off Claim

  • Plan purchases against actual business needs. The write-off is a deduction, not a rebate. You only save your marginal tax rate, so don't buy gear you wouldn't otherwise need just to "save tax". A $5,000 tool only saves you around $1,300 in tax at the 27.5% small business rate.
  • Stack multiple eligible assets. Because the threshold is per asset, splitting larger purchases (where genuinely separate assets) lets you claim each one instantly.
  • Get assets installed and operational before 30 June. Delivery dates and installation timelines matter more than purchase dates.
  • Keep clean records. Tax invoices, proof of payment, and evidence the asset is being used in the business. The ATO does audit these claims.
  • Talk to your accountant before you spend big. Especially if you're near the $10 million turnover threshold or running multiple connected entities.

Shop the Instant Asset Write-Off Range

If you're planning to use the $20,000 instant asset write-off before 30 June 2026, now's the time to act. Browse our full range of eligible tools, power equipment, storage and trade gear, all priced under the threshold and ready to ship.

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Disclaimer

This article is general information only and isn't legal, tax or financial advice. Tax outcomes depend on your individual circumstances. Speak to a registered tax agent or accountant, and refer to the ATO website for the latest guidance: ato.gov.au.