Highlights

  • The $20,000 instant asset write-off is permanent for eligible small businesses from July 2026.
  • The threshold applies per eligible asset rather than to total annual purchases.
  • A small-business depreciation pool below the threshold can qualify for an immediate deduction.
  • The simplified-depreciation lock-out suspension is scheduled to end on 30 June 2027.

The permanent $20,000 instant asset write-off attracts attention because it can turn an equipment purchase into an immediate deduction. Yet two quieter rules can be just as useful. A low small-business depreciation pool may be cleared in one deduction, while businesses that previously left simplified depreciation can currently re-enter without serving the usual five-year lock-out. Both deserve attention before the 2026-27 year closes.

The Headline Rule Applies Asset by Asset

Eligible small businesses with aggregated turnover below $10 million can immediately deduct the business portion of eligible depreciating assets costing less than $20,000 when first used or installed ready for use. The threshold is applied to each asset. An asset costing exactly $20,000 does not fall below the limit and generally enters the small-business pool instead.

Larger Assets Move Into the Pool

Assets at or above the threshold are generally pooled under simplified depreciation. The source material describes a 15% deduction in the first year and 30% in later years. Pooling simplifies record-keeping, but it can stretch deductions across multiple years unless the low-balance rule becomes available.

A Small Pool Can Be Cleared at Once

Where the pool balance is below the instant asset write-off threshold at the relevant year-end test, an eligible business can deduct the remaining pool balance immediately. This can bring forward deductions that would otherwise continue at the pool rate. New purchases, disposals and other adjustments can change the calculation, so businesses need to work from the actual pool balance rather than a rough estimate.

The Lock-Out Pause Creates a Time-Limited Choice

Ordinarily, a business that opts out of simplified depreciation can face a five-year restriction before returning. The ATO guidance cited in the source says that lock-out rule is suspended until 30 June 2027. That gives eligible businesses a window to reconsider simplified depreciation during 2026-27, but opting in generally affects all eligible depreciating assets rather than selected purchases.

Check Exclusions Before Buying for the Deduction

Not every asset qualifies. Capital works, certain R&D assets and some assets predominantly leased out can sit outside simplified depreciation. GST treatment also changes the relevant cost depending on registration and input-tax-credit entitlement. The tax deduction should therefore follow a genuine business purchase decision, not drive one.

Timing Still Matters Even With a Permanent Threshold

Permanent does not mean every purchase should be rushed. The deduction generally depends on when an eligible asset is first used or installed ready for use, not merely when it is ordered or paid for. Businesses should also consider whether an immediate deduction is actually more valuable than retaining cash, particularly where financing costs are high or taxable income is low. Before year-end, owners can review the asset register and pool balance, but purchase decisions should still be based on operational need, expected return and cash flow as well as tax timing.