How to make the most of the instant asset write-off

Did you know that you can claim immediate tax deductions on assets you buy for your business? This is thanks to the instant asset write-off, a tax benefit created by the Australian government as a way to relieve the tax burden on small business owners.

With the incentive being extended until June 2025, we're sharing our tips for making the most of it. But first, what exactly is it?

Important update: In the recently delivered 2025 federal budget, it was announced that the federal government is not to extend the $20,000 instant asset write-off beyond June 2025. If new legislation isn't passed, the threshold will drop to just $1,000 from July 1, 2025. If you're looking to take advantage of the current rules and are considering asset finance, reach out to us today.

What is the instant asset write-off?

The instant asset write-off (IAWO) allows business owners to claim immediate deductions on the full cost of eligible depreciating assets in the year they first use or install them. Depreciating assets have a limited life expectancy and can reasonably be expected to decline in value over the time they are used.

Designed to help small businesses improve cash flow and reduce compliance costs, the instant asset write-off contains a $20,000 threshold, which applies on a per-asset basis—meaning small businesses can benefit from instantly writing off multiple assets [1].

Who's eligible for the instant asset write-off?

The instant asset write-off is available for several types of businesses:

• Sole traders: An individual who runs a business on their own;
• Partnerships: A business structure where two or more individuals share ownership and profits;
• Companies: A separate legal entity owned by shareholders and managed by directors;
• Trusts: A legal arrangement where a trustee holds and manages assets on behalf of beneficiaries.

To qualify [1]:

• Your business must have an aggregated turnover of under $10 million
• The asset must cost less than $20,000 for the relevant financial year
• You must purchase the eligible asset and either use it or install it ready for use within the same financial year you claim the deduction.

What assets can you claim under the write-off?

You can write off or depreciate assets (depending on their cost), including:

• Vehicles, such as cars, vans, and trucks*
• Machinery, tools, and equipment (such as tractors, industrial ovens, and welding equipment)
• Office equipment and furniture (including computers, printers, desks, and chairs)
• Selected building improvements (including new roofs, solar panels, security systems, air conditioning, and electrical wiring)

*A couple of notes here: Vehicles will, in most cases, likely fall under depreciation rules. Plus, whilst passenger vehicles have a ‘car limit’ capped at $64,741, trucks, vans, and utes are classed as commercial vehicles and remain uncapped.

Are there exclusions?

Certain limits do apply [2]:

• Assets leased or expected to be leased for more than 50% of the time under a depreciating asset lease;
• Assets previously allocated to a low-value asset pool before applying the simplified depreciation rules;
• Horticultural plants, including grapevines;
• Software allocated to a software development pool;
• Assets used in research and development (R&D) activities;
• Capital works, including buildings and structural improvements.

What about assets that cost more than $20,000?

While assets valued over $20,000 can't be immediately deducted, small businesses can still place these assets into the small business simplified depreciation pool, depreciating them at 15% in the first income year and 30% in each subsequent income year.

Benefits of the instant asset write-off

The instant asset write-off helps free up capital, but what exactly can that do for your business?

Offers immediate tax deductions

With the instant asset write-off, eligible business entities can claim an immediate deduction for the full cost of eligible assets in the year they are first used or installed. Instead of waiting to gradually claim depreciation, they can deduct the full amount upfront, which helps lower tax liability and provides immediate financial relief.

Helps boost cash flow

When a business claims their asset write-off, their taxable income drops, which means their payable tax amount is also lower. This leaves them with extra cash flow, which could be particularly helpful for businesses facing seasonal fluctuations or unexpected expenses.

Supports business growth

The instant asset write-off makes it more affordable to invest in tools and technology. It puts money back in business owners' pockets, which they can invest in growth initiatives, such as entering new markets, increasing marketing efforts, and enhancing customer retention.

How to calculate your instant asset write-off

According to the ATO, here's how to work out your write-off [1]:

1. Identify any portion of the asset’s use that is for private purposes. Subtract the private use portion of the cost of the asset.
2. The remaining balance is the portion of the asset used for earning assessable income. You can only claim the taxable purpose portion as a deduction.
3. Ensure that the total cost of the asset is below the relevant threshold to qualify.

How to maximise your instant asset write-off

With exceptional benefits on offer for businesses turning over less than $10M per annum, the $20,000 instant asset write-off can not only help to lower tax liability but also make tax-time purchases more accessible.

Want to take advantage of this incentive without impacting cash flow or dipping into cash reserves? Business finance could be a great option to do so and claim tax back on interest payments.

To view your eligibility for business finance or get a quote, click here. Alternatively, to view your top options, use our free online loan finder.

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References

1. https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/depreciation-and-capital-expenses-and-allowances/simpler-depreciation-for-small-business/instant-asset-write-off
2. https://www.ato.gov.au/businesses-and-organisations/income-deductions-and-concessions/depreciation-and-capital-expenses-and-allowances/simpler-depreciation-for-small-business/assets-and-exclusions