Key Highlights

  • The $20,000 instant asset write-off is permanent from 1 July 2026.
  • The measure applies to businesses with aggregated turnover under $10 million.
  • Equifax data showed Demand fell 12.6% YoY in July 2026.
  • The five-year lockout rule remains suspended until 30 June 2027.

For years, small Business owners were told to wait for the next extension of the instant asset write-off. That wait is over: the $20,000 write-off is now a permanent part of the tax law. Yet one widely cited measure of small business equipment borrowing went backwards in July, with Equifax reporting SME asset finance demand down 12.6% on a year earlier. The gap between policy certainty and business behaviour is worth unpacking before the next round of Investment decisions.

What the Parliament actually passed in August

The permanent write-off was delivered through the Tax Reform No. 2 package, which passed the Senate on 19 August 2026. It is enacted law.

According to Treasurer Jim Chalmers' media release on the package's passage, the $20,000 instant asset write-off applies permanently from 1 July 2026 to businesses with aggregated turnover under $10 million. The government says that covers about 2.7 million businesses and will save around $32 million a year in compliance costs.

The ATO's explainer on the new law, updated on 27 August 2026, also notes that the simplified Depreciation five-year lockout rule remains suspended until 30 June 2027. That rule ordinarily stops a business that opts out of simplified depreciation from re-entering for five years.

The same package reinstated company loss carry-back for income years from 1 July 2026. It allows eligible companies that are not significant global entities to carry a tax loss back up to two years and claim a refundable offset against tax previously paid. The government expects around 85,000 businesses to benefit.

How the write-off works in practice

The write-off generally lets an eligible small business immediately deduct the cost of a depreciating asset that costs less than $20,000, in the year the asset is first used or installed ready for use. The threshold applies per asset, so several qualifying items can each be written off.

For businesses registered for GST, the cost is generally worked out excluding any GST that can be claimed back as an input tax credit. Assets costing $20,000 or more generally go into the small business simplified depreciation pool instead.

The concession changes the timing of a deduction. It does not make an asset free.

Hypothetical example: a small company taxed at the 25% Base Rate entity rate buys a machine for $18,000, excluding GST, and has it installed ready for use in 2026–27. Under the write-off, it can deduct the full $18,000 that year, reducing its tax by $4,500 (25% of $18,000). The after-tax cost of the machine is still $13,500.

Had the same asset gone into the small business pool instead, the first-year deduction would generally be 15%, or $2,700, worth $675 in tax. The write-off therefore brings forward $3,825 of tax benefit into the first year. The business still needs the cash or finance to buy the machine in the first place.

Why asset finance demand fell 12.6%

Equifax data showed SME asset finance demand down 12.6% year on year in July 2026. Total asset finance demand was down 9.1% over the same period.

In contrast, business Loan demand rose 6.2% year on year, according to the same figures. That suggests small businesses were not simply withdrawing from Credit altogether.

Equifax measures demand for finance, not total equipment spending. Some purchases are funded from cash reserves or general business lending. A fall in one category does not on its own prove that investment has stalled.

The timing also matters. The July figures predate the Senate's passage of the permanent write-off on 19 August, so the law was not yet settled when those applications were being made.

Three possible explanations, none proven

There is no single official explanation for the decline, and the following are possible factors rather than established causes.

First, permanence may remove urgency. When the write-off was temporary or due to lapse, there was a reason to buy before a deadline. A permanent rule gives certainty, but it can also take away the "use it or lose it" push that helped bring purchases forward.

Second, the cost of borrowing remains a consideration. The Reserve Bank's cash rate has been 4.85% since 3 November 2026. A Tax deduction worth a quarter of an asset's price for a base rate entity does not change the fact that the other three-quarters must be funded.

Third, Cash Flow pressure can outweigh tax planning. A deduction only produces a tax benefit when a business has Taxable Income to offset. Businesses running at a loss may get little immediate value, although the reinstated loss carry-back may help some companies that previously paid tax.

How loss carry-back fits alongside the write-off

The two measures interact. A company that makes a large asset purchase and writes it off could, in some circumstances, push itself into a tax loss for the year. Under the loss carry-back rules, an eligible company may be able to carry that loss back against tax paid in the previous two income years and claim a refundable offset.

Under the design of the earlier version of the rules, the amount carried back was generally limited by the company's earlier tax payments and its franking account balance. The measure is available only to companies, not sole traders, partnerships or trusts. Eligibility and the calculation should be checked against the ATO's guidance for the relevant year.

That distinction matters because many small businesses operate through trusts or as sole traders. For those structures, the write-off still applies if the turnover test is met, but the carry-back does not.

What to watch next

The Senate Economics Legislation Committee is due to report on 13 November 2026 on the separate trust and housing tax bills, which could change the wider planning environment for small businesses that operate through discretionary trusts.

The Mid-Year Economic and Fiscal Outlook is due in December 2026 and will update the budget position.

The suspension of the simplified depreciation lockout runs until 30 June 2027, which is also the end of the first full income year under the permanent write-off.

Further Equifax data releases will show whether the July fall was a one-off around the legislative timing or the start of a longer trend. Until then, the 12.6% figure is a snapshot of one month, not a verdict on whether the permanent write-off is working.