After years of temporary extensions, the $20,000 instant asset write-off is now a permanent part of Australian tax law. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026 received Royal Assent on 26 August 2026, locking in the threshold from 1 July 2026 for small businesses with aggregated turnover under $10 million. With the 2026–27 financial year three months old, business owners can now plan equipment purchases with more certainty.

The change is simple in concept but has important limits. Here is what can be claimed, and what cannot.

What the new law says

The write-off sits in Schedule 2 of the Tax Reform No. 2 Act, which passed Parliament on 19 August 2026. The same Act introduced a refundable loss carry-back offset for companies and negative gearing amendments for inherited and divorce-split properties.

From 1 July 2026, eligible small businesses can immediately deduct the cost of eligible depreciating assets that cost less than $20,000. The threshold applies per asset, so several assets can each be written off in the same year.

Treasurer Jim Chalmers made that point in his second reading speech, saying the threshold applies "on a per asset basis, so small businesses can instantly write-off multiple assets".

According to the government, up to 4.1 million businesses are eligible, and the measure is expected to save around $32 million a year in compliance costs.

For much of the past decade, the write-off threshold was lifted through a series of temporary extensions, often confirmed late in the financial year. That left business owners guessing whether a purchase made in July would qualify by June.

A permanent threshold removes that uncertainty. Businesses can time purchases around operational needs rather than around legislative deadlines.

It also removes the incentive to rush purchases before a threshold expires. Buying an asset simply to secure a deduction rarely makes financial sense, because the deduction only reduces tax on the amount spent.

How the $20,000 test works

The test is applied to each asset's cost. For businesses registered for GST, the cost is generally worked out excluding the GST that can be claimed back as a credit.

Under the long-standing small business rules, the deduction is claimed in the income year the asset is first used, or installed ready for use, for a taxable purpose. Where an asset is also used privately, only the business-use portion is deductible.

Typical examples could include tools, computers, vehicles, kitchen equipment, shop fittings and machinery, provided each asset costs less than $20,000 and the other conditions are met.

Timing can trip people up. An asset bought in late June but not installed ready for use until July would generally be claimed in the later income year, not the year of purchase.

Not every business cost is a depreciating asset. Buildings and structural improvements are generally dealt with under the separate capital works rules rather than the write-off.

The write-off is part of the simplified depreciation rules for small business entities. Larger businesses use the general depreciation rules instead.

What happens to assets of $20,000 or more

Assets costing $20,000 or more cannot be written off immediately. Instead, they go into the small business simplified depreciation pool.

The pool is depreciated at 15 per cent in the first year and 30 per cent in each later year. That is slower than an immediate write-off, but it still gives eligible businesses a simpler way to depreciate larger assets.

A worked example

This is a hypothetical illustration only.

A café company with turnover of $1.8 million is a base rate entity taxed at 25 per cent. In 2026–27 it buys a coffee machine for $14,500, a laptop for $2,200 and a refrigerated display cabinet for $26,000, all GST-exclusive and used wholly for the business.

The coffee machine and laptop each cost under $20,000, so the café can deduct $16,700 immediately.

The display cabinet goes into the pool. The first-year deduction is 15 per cent, or $3,900. In 2027–28, the pool deduction on that asset would be 30 per cent of the remaining $22,100, or $6,630.

Total first-year deductions are $20,600. If the café has enough taxable income, that reduces its tax by up to $5,150 at the 25 per cent rate.

The write-off is a deduction, not a cash rebate. The café has still spent $42,700 on equipment, and the tax benefit is a fraction of that cost.

The timing of that benefit matters too. The saving generally flows through when the business lodges its return and is assessed, not on the day the equipment is bought, so cash flow planning remains important.

Who is eligible, and who is not

The write-off is available to small business entities with aggregated turnover under $10 million. Aggregated turnover includes the turnover of connected entities and affiliates, so business groups need to add up turnover across related entities.

Businesses above the $10 million threshold cannot use the write-off. Sole traders, partnerships, trusts and companies can all qualify, provided they meet the turnover test.

Companies that are not significant global entities may also benefit from the new loss carry-back offset in the same Act. It allows revenue losses from 2026–27 onwards to be carried back against tax paid in the previous two years, limited by the franking account balance. First claims will be made in 2026–27 company tax returns.

The $10 million threshold also matters for capital gains. From 1 July 2027, the turnover threshold for the small business 50 per cent active asset reduction rises from $2 million to $10 million, aligning it with the write-off.

What to watch next

The first claims under the permanent threshold will appear in 2026–27 tax returns, lodged from July 2027. Businesses may benefit from keeping invoices, delivery records and installation dates, as these show when each asset was first used or installed ready for use.

Businesses operating through discretionary trusts should also watch the proposed 30 per cent minimum tax on trusts from 1 July 2028, which is in exposure draft form and not yet law.

A registered tax agent or BAS agent can help confirm eligibility and how the rules apply to individual circumstances.