What is the $20,000 instant asset write-off extension and who qualifies for it?

The extension allows eligible businesses to immediately deduct the full cost of new assets costing less than $20,000 that are first used or installed ready for use by a specified deadline. To qualify, the business must meet the turnover threshold defined by the tax rules for that period, and the asset must be used more than 50% for business operations.

What types of assets can be claimed under this instant write-off and what are the timing requirements?}

Eligible assets typically include tools, equipment, vehicles (if not excluded or covered under special rules), and other plant and equipment. The asset must be first used or installed by the end of the eligibility period, and any private use portion must be apportioned. Loan-financed assets can still qualify but you must not claim the deduction until the asset is ready for use.

$20,000 Instant Asset Write-Off Extended: What Small Businesses Need to Know

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The instant asset write-off is one of the most valuable tax incentives available to Australian small businesses. It allows eligible businesses to claim an immediate tax deduction for the business portion of assets purchased and installed ready for use, rather than depreciating them over several years.

Under the current legislation, the threshold is $20,000 per asset. You can claim multiple assets in the same financial year, provided each individual asset costs less than $20,000. At Trinity Accounting Practice, we help small businesses across Sydney and Australia time their asset purchases strategically and ensure every eligible deduction is claimed correctly.

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Eligibility Criteria

To access the instant asset write-off, your business must have an aggregated annual turnover of less than $10 million, be actively trading at the time of the purchase, and purchase and install the asset between 1 July 2023 and 30 June 2025.

The aggregated turnover test includes the turnover of any connected or affiliated entities, not just your own business. If you are unsure whether your business meets the threshold, speak to our team for clarification.

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What Can You Claim?

A wide range of business assets are eligible for the instant write-off, provided each individual item costs less than $20,000 (excluding GST if you are registered for GST, or including GST if you are not registered).

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Common Eligible Assets

Eligible assets include tools, machinery, and work equipment, office furniture such as desks, chairs, shelving, and partitions, technology including laptops, tablets, and phones, point-of-sale systems, security cameras, and alarm systems, and commercial appliances such as fridges, freezers, and air-conditioning units.

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Work Vehicles

Vehicles can also qualify for the instant asset write-off, but there are important limits to be aware of. For cars (defined as vehicles designed to carry fewer than nine passengers and a load of less than one tonne), the depreciable cost is limited to the car depreciation cost limit, which is $69,674 for the 2024-25 income year. This means even if a car costs less than $20,000, the depreciation cost limit still applies to how the deduction is calculated. Commercial vehicles such as utes and vans with a payload capacity of one tonne or more are not subject to the car limit.

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What Cannot Be Claimed

Not all purchases are eligible for the instant write-off. You cannot claim assets costing $20,000 or more (these are added to the general small business pool and depreciated at 15 per cent in the first year and 30 per cent each year after that), capital works such as building renovations or structural improvements (these are claimed at 2.5 per cent per year over 40 years), assets that are leased to other businesses, and certain intangible assets.

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Mixed-Use Assets

If an asset is used for both business and personal purposes, you can only claim the business-use percentage. For example, if you purchase a laptop for $1,500 and use it 70 per cent for business, your instant asset write-off claim would be $1,050. You must keep records to substantiate the business-use percentage in case of an audit.

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How It Helps Your Business

The instant asset write-off provides a meaningful cash flow benefit for small businesses. Instead of depreciating an asset over its useful life — which might spread the deduction across three, five, or even ten years — you receive the full deduction in the year the asset is first used or installed ready for use.

This means a faster tax deduction that reduces your taxable income in the current year, a lower tax bill or larger refund at tax time, greater incentive to invest in equipment and technology that helps your business grow, and improved cash flow during the financial year when you need it most.

For a small business paying the base rate entity tax rate of 25 per cent (for companies with aggregated turnover under $50 million), a $19,999 asset purchase would produce a tax saving of approximately $5,000 in the year of purchase — compared to just $750 if the asset were depreciated at 15 per cent in the first year under the general pool method.

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Timing Is Critical

To access the deduction for the 2024-25 financial year, the asset must not only be purchased but also installed and ready for use in your business by 30 June 2025. Simply ordering or paying for an asset before 30 June is not sufficient — it must be physically in your possession and available for use.

If you are planning significant equipment purchases, it is worth discussing the timing with your accountant to ensure the deduction falls in the most beneficial financial year. In some cases, it may be more advantageous to delay a purchase to the following year depending on your expected income and tax position.

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Record-Keeping Requirements

To substantiate your instant asset write-off claims, you must keep all tax invoices and receipts for each asset purchased, record the date of purchase and the date the asset was installed or ready for use, determine and document the business-use percentage for each asset, and ensure the asset is used in your active business and not held purely for investment purposes.

You are required to keep these records for a minimum of five years from the date you lodge the relevant tax return. Using accounting software such as Xero makes it straightforward to capture and store this information throughout the year.

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Plan Your Asset Purchases Now

The $20,000 instant asset write-off is a valuable opportunity to invest in your business while reducing your tax bill. However, the measure is currently legislated to end on 30 June 2025, so planning your purchases now ensures you can take full advantage before the deadline.

At Trinity Accounting Practice, we help small businesses review which assets are eligible, calculate business-use portions, time purchases for the best tax outcome, and ensure everything is claimed correctly under the current rules. Book a consultation to plan your asset investments with confidence.

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Trinity Accounting Practice

Accounting Firm in Beverly Hills, Sydney

Phone: 02 9543 6804

Address: 159 Stoney Creek Road, Beverly Hills NSW 2209

Website: www.trinitygroup.com.au

Weekend and after-hours appointments available

Book online now

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Disclaimer: Information provided on this website is intended as a general overview only and does not replace professional advice tailored to your personal circumstances.

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