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

This article provides general information only and does not constitute tax advice. Always verify with the ATO and consult a registered tax agent before advising clients on specific claims.

What changed in the 2026 budget

On 12 May 2026, as part of the 2026–27 Budget, the Australian Government announced it will permanently increase the instant asset write-off for small businesses to $20,000 from 1 July 2026 to help improve cash flow and reduce compliance costs.

This ends more than a decade of annual uncertainty. The tax measure, which has been in place in some form or another since 2015, has been available to small businesses with an aggregated turnover of less than $10 million. Each year, accountants and their clients have had to wait for the budget to confirm whether the write-off would continue — and often, enabling legislation was seemingly passed at the last minute.

Making it permanent removes that friction entirely.

One important caveat: This measure is not yet law. The budget announced the intention. Legislation must pass parliament before the permanent extension is confirmed. For the 2026–27 year, businesses should watch for the enabling legislation to pass and check the ATO website for confirmation before relying on the permanent extension.

What the instant asset write-off actually does

The $20,000 Instant Asset Write-Off is a tax concession that allows eligible Australian small businesses to immediately claim the full cost of qualifying business assets in the same financial year they are first used or installed ready for use, rather than spreading the deduction over several years.

The tax saving over the asset's life is identical either way — what changes is the timing. For a business paying the 25% small company tax rate, a $15,000 asset purchase immediately reduces this year's tax bill by $3,750. That cash flow impact is the reason clients ask about this every year.

The $20,000 threshold applies per asset, allowing multiple claims if each item is below the threshold. A client purchasing three laptops at $1,800 each and a printer at $1,500 can claim all four as separate write-offs in the same year — not as one aggregated purchase.

Who qualifies

Small businesses with turnover under $10 million can immediately claim the full cost of eligible assets in the same financial year. Assets must be installed and ready for use before 30 June of the income year you are claiming.

The full eligibility checklist for your clients:

Business requirements:

Aggregated annual turnover of less than $10 million (including connected and affiliated entities)
Must elect to use simplified depreciation rules for the income year
Must be actively trading

Asset requirements:

Asset must cost less than $20,000 (the threshold applies to cost excluding GST for GST-registered businesses)
Must be first used or installed ready for use in the income year of the claim
Must be used predominantly for business purposes (more than 50%)
Must be owned by the business — only structures where the business owns the asset qualify — chattel mortgage and hire purchase qualify, but leased assets do not

What is NOT eligible:

Leased assets, building improvements, and items mainly used for personal purposes do not qualify. Incorrect claims in these areas can lead to compliance issues and penalties.
Assets costing $20,000 or more — these go into the small business general pool

What assets clients can write off

The range of eligible assets is broad. Eligible assets span virtually every category of business equipment and tools: office furniture, technology, and equipment used for business purposes. Common examples relevant to your accounting clients:

Office and technology:

Laptops, desktops, tablets, monitors
Printers, scanners, copiers
Phones and communication equipment
Accounting and business software (where purchased outright, not SaaS subscriptions)

Trades and services:

Tools and trade equipment under $20,000
Safety equipment
Industry-specific machinery and instruments

Vehicles:

Business vehicles where the cost is under $20,000 — though for mixed-use vehicles, only the business-use proportion is deductible

Second-hand assets: Both new and second-hand assets qualify — a useful point for clients purchasing used equipment or refurbished technology.

Why this matters for accountants managing client portfolios

For accounting firms managing multiple small business clients, the permanent write-off creates both an opportunity and a workflow challenge.

The opportunity: Every client with turnover under $10 million is potentially eligible. With the write-off now permanent, there is no longer a June 30 deadline pressure for the threshold to disappear — but the end of financial year deadline for using the asset before claiming still applies.

The workflow challenge: Tracking which clients have made eligible asset purchases, ensuring assets are correctly categorised in their accounting software, and identifying purchases that were incorrectly treated as depreciation rather than immediate write-offs requires systematic review across a client portfolio.

This is where AI accounting tools meaningfully reduce the manual workload.

How AI accounting tools help manage write-off claims

Xero — asset tracking and categorisation

Xero's fixed asset register tracks asset purchases with purchase price, date of acquisition, and depreciation method. For instant asset write-off claims, the key is ensuring assets are categorised correctly at the point of entry — not reclassified at tax time.

Xero's AI transaction categorisation automatically codes purchases to the correct account when amounts and merchant names match historical patterns. For a client who regularly buys IT equipment, the AI will suggest the correct asset account automatically, reducing the risk of small asset purchases being misclassified as general expenses.

The Established plan's Syft Analytics also surfaces budget variance reports that help identify unusual asset purchases that might qualify for the write-off but have been miscoded.

Read our full Xero review →

QuickBooks Online — the fixed assets module

QuickBooks Online includes a fixed assets module that tracks asset purchases, disposal dates, and depreciation methods. For small business clients using the Plus or Advanced plan, the system can be configured to flag assets under $20,000 for instant write-off treatment rather than standard depreciation.

The Accounting Agent in QuickBooks also surfaces anomaly detection — flagging transactions that look like asset purchases but have been categorised as expenses, which can work in either direction for write-off claims.

Read our full QuickBooks review →

FreshBooks — expense tracking for sole traders and small firms

For sole traders and very small businesses using FreshBooks, the expense tracking and receipt scanning features capture asset purchases at the point of purchase. The AI categorisation suggests accounts based on merchant and amount — useful for catching laptop purchases or equipment that qualifies for the write-off before the end of the financial year.

FreshBooks' financial reports give a quick P&L view that helps identify whether a client has made eligible purchases during the year.

Read our full FreshBooks review →

The practical checklist for accountants before 30 June 2026

Even with the write-off becoming permanent from 1 July 2026, the current financial year deadline still applies for 2025–26 claims. For clients wanting to maximise write-offs before 30 June 2026:

Review client asset purchases year to date: Pull a transaction report from Xero or QuickBooks for each client and filter for purchases between $1,000 and $20,000. Review whether assets have been correctly categorised for immediate write-off.

Check installation dates: The asset must be installed and ready for use by 30 June 2026 — not just ordered or invoiced. For clients purchasing equipment in late June, confirm delivery and installation have occurred.

Verify the simplified depreciation election: The write-off is only available to businesses that have elected to use simplified depreciation rules. Confirm this is in place for eligible clients before lodging.

Flag mixed-use assets: For clients with vehicles or equipment used for both business and personal purposes, the write-off applies only to the business-use proportion. Document the usage split.

Check connected entity turnover: The $10 million turnover threshold applies to the aggregated turnover of the business and any connected or affiliated entities — not just the entity in question. Confirm connected entities have been included in the calculation.

What the permanent extension means for client planning from 1 July 2026

From 1 July 2026, small businesses no longer need to wait on annual budget announcements or rush purchases before a temporary deadline. The threshold is not indexed and remains at $20,000 until further legislation changes it.

This changes how accountants can advise clients on asset purchases:

Before permanent extension: Clients needed to time equipment purchases before June 30 to guarantee the write-off threshold would apply. This created artificial EOFY spending spikes.

After permanent extension: Clients can buy when it makes business sense — not when the tax calendar dictates. Better decisions, better cash flow management.

The Budget estimated the measure will improve cash flow for small businesses by around $890 million over five years. For accountants, this is a long-term advisory talking point — not just an annual EOFY conversation.

Frequently asked questions

Is the $20,000 instant asset write-off definitely permanent from 1 July 2026? The budget announced this intention but the enabling legislation has not yet passed parliament as of May 2026. The measure is not yet law. Monitor the ATO website and treasury.gov.au for legislative updates before advising clients to rely on the permanent extension for 2026–27 planning.

Does the $20,000 threshold apply per asset or per year? Businesses can use the measure to claim multiple purchases of both new and second-hand items, with the $20,000 threshold applying per asset. There is no annual cap on the number of assets claimed, as long as each individual asset costs less than $20,000.

Can clients claim software and subscriptions? Software purchased outright (a perpetual licence) may qualify. SaaS subscriptions paid monthly or annually are generally treated as operating expenses rather than depreciating assets and do not qualify for the instant write-off. Confirm with the ATO or a registered tax agent for specific software types.

What happens to assets that cost $20,000 or more? Assets costing $20,000 or more can be grouped in the small business general pool. They are depreciated at 15% in the first year and 30% in subsequent years.

Does the write-off apply to GST-registered businesses differently? For GST-registered businesses, the $20,000 threshold applies to the GST-exclusive cost. For non-GST-registered businesses, the threshold applies to the full cost including GST.

Stay on top of your ATO obligations

With the instant asset write-off becoming permanent and Payday Super starting 1 July 2026, keeping track of compliance deadlines is more important than ever. Use our free ATO Tax Calendar Generator to get a personalised calendar of every upcoming obligation for your entity type — BAS, super, tax returns, FBT, and TPAR.

Generate your free ATO tax calendar →

Pricing and features for accounting tools mentioned in this article are verified as of May 2026. This article is for general informational purposes. Tax rules change — verify current ATO guidance and consult a registered tax agent before advising clients on specific claims. Source: ATO Instant Asset Write-Off

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