What is the small business instant asset write-off in Australia?
The instant asset write-off allows eligible Australian businesses to immediately deduct the full cost of qualifying business assets in the year of purchase, rather than depreciating them over several years. For 2024-25, the threshold is $20,000 per asset for businesses with aggregated turnover under $10 million.
Detailed Explanation
The instant asset write-off is one of the most valuable tax concessions available to small and medium Australian businesses. Instead of claiming a depreciation deduction over several years, eligible businesses can deduct the full cost of eligible assets in the year they are first used or installed ready for use in the business.
Current rules for 2024-25
For the 2024-25 income year, the threshold is $20,000 per asset for businesses with aggregated turnover under $10 million. This applies to assets that are first used or installed ready for use between 1 July 2024 and 30 June 2025.
Note: The threshold has changed significantly from year to year — always verify the current threshold for the income year you are in, as it has changed multiple times in recent years and budget announcements do not always become law immediately.
Who is eligible?
To access the instant asset write-off, your business must: - Have an aggregated turnover of less than $10 million for 2024-25 - Use the simplified depreciation rules (most small businesses do automatically) - First use or install the asset ready for use in the business during the relevant income year - Have the asset primarily used for a taxable purpose
The $20,000 threshold is per asset, not an aggregate total. You can claim multiple assets each below the threshold.
What assets are eligible?
The instant asset write-off applies to depreciating assets — tangible assets used in carrying on a business that have a limited effective life and are expected to decline in value over time. Examples include: - Tools, equipment, and machinery - Computers, laptops, tablets, and mobile phones - Vehicles (subject to the luxury car tax cost limit — see below) - Office furniture and fittings - Point-of-sale systems - Trailers and work vehicles
What is excluded?
- Buildings and structural improvements (these are depreciated under separate capital works rules)
- Land
- Assets used primarily for private purposes
- Trading stock
- Assets acquired before the business commenced
The luxury car limit
For vehicles, the instant asset write-off is limited to the luxury car tax (LCT) threshold cost limit. For 2024-25, the LCT threshold is $89,332 (or $76,950 for fuel-efficient vehicles). If a car costs $150,000, only $89,332 can be written off through the instant asset write-off; the excess is allocated to the small business pool for depreciation.
How it works in practice
If you purchase a $15,000 piece of equipment for your business in 2024-25: - Without instant asset write-off: you claim a depreciation deduction of approximately $3,000 per year over 5 years - With instant asset write-off: you claim the full $15,000 in the year of purchase
At a 25% company tax rate, the immediate deduction saves $3,750 in tax this year rather than $750 per year for 5 years. The total tax saving is the same, but the timing benefit provides a significant cash flow advantage.
Small business pool
Assets that cost more than the instant asset write-off threshold but are still eligible for simplified depreciation go into the small business pool. The pool is depreciated at: - 15% in the first year (half-year rule applies) - 30% on the diminishing value per year thereafter
If the pool balance falls below $20,000 at the end of the year, you can write off the entire remaining pool balance immediately.
Balancing adjustments on disposal
If you sell or dispose of an asset that was claimed under the instant asset write-off, you must include the proceeds as assessable income. For example, if you wrote off a $12,000 vehicle and later sell it for $5,000, the $5,000 is ordinary income in the year of disposal.
Source: ATO Instant asset write-off
Real-World Examples
Plumber buying a new van and tools
A plumbing Pty Ltd (turnover $1.2 million) purchases a work van for $45,000 (under the LCT threshold) and $8,000 of new tools in the same year. Both qualify for instant asset write-off. The company claims $53,000 as an immediate deduction, saving $13,250 in company tax at 25% compared to the nil deduction scenario.
Pool write-off at year end
A small retailer has a small business pool with a diminishing value balance of $18,000 at 30 June 2025 (after the year's 30% depreciation). Since the balance is below the $20,000 threshold, they can write off the entire remaining $18,000 immediately rather than continuing to depreciate it at 30% per year.
Common Mistakes to Avoid
- Assuming the instant asset write-off threshold is the same each year — it has changed multiple times (from $20,000 to $30,000 to $150,000 and back) and budget announcements do not always become law in the same year.
- Applying the instant asset write-off to the full purchase price of a luxury car above the LCT cost limit, without recognising the cap applies.
- Forgetting to include sale proceeds as assessable income when disposing of an asset that was fully written off under the instant asset write-off.
- Claiming the write-off on assets used primarily for private purposes — only the business-use proportion is eligible for immediate deduction.
Frequently Asked Questions
Can I claim the instant asset write-off on a car?
Yes, but subject to the luxury car tax cost limit. For 2024-25, the LCT threshold is $89,332 (or $76,950 for fuel-efficient vehicles). If the car costs less than this, the full amount can be written off. If it costs more, only the LCT threshold amount is eligible for the instant asset write-off; the remainder goes into the small business pool. You also need to apply a private-use apportionment if the car is used for any private purposes.
When must I first use or install the asset to claim the write-off?
The asset must be first used or installed ready for use in your business during the relevant income year (1 July to 30 June). Paying a deposit in one financial year but not receiving or installing the asset until the next financial year means you claim the deduction in the later year. The key date is when the asset is ready for use, not when you pay for it.
What is aggregated turnover and how does it affect my eligibility?
Aggregated turnover is your business's annual turnover plus the annual turnovers of all connected entities (entities where you or a connected entity own 40% or more of votes) and affiliated entities. It is designed to prevent related businesses from splitting to stay under the threshold. You must calculate aggregated turnover to confirm your $10 million eligibility.
What happens to assets above the threshold?
Assets costing more than the $20,000 threshold are not immediately written off. They are added to your small business pool if you use the simplified depreciation rules. The pool is depreciated at 15% in the first year and 30% per year thereafter on the diminishing value. When the pool balance drops below $20,000 at year end, the entire remaining balance can be immediately written off.
Practical Tips
- Time major asset purchases to occur before 30 June to bring the deduction into the current financial year rather than the next — this can significantly impact your tax bill timing.
- Verify the current threshold at the ATO website before making large purchases — the threshold changes with federal budgets and is sometimes only finalised when legislation passes.
- Keep the purchase invoice and commissioning date evidence for each asset claimed — the ATO can request proof that the asset was installed ready for use before 30 June.
- If you are near the aggregated turnover threshold, calculate carefully to confirm eligibility — losing access to the instant asset write-off by $1 of turnover can cost tens of thousands in tax timing differences.
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