Instant asset write-off explained

What is the instant asset write-off?

An instant asset write-off lets eligible businesses claim an immediate tax deduction for the business-use portion of qualifying assets, rather than depreciating the cost over several years.

Both new and second-hand assets can qualify for the instant asset write-off, provided each asset costs less than the relevant threshold and is first used, or installed ready for use, within the required financial year and is not excluded. There are a small number of assets that are excluded.

Key points about instant asset write-offs:

• The eligible asset can be new or second-hand.
• It must be a depreciating asset used for business purposes.
• The cost must be below the instant asset write-off threshold.
• The asset must be first used or installed ready for use by the relevant deadline.
• If the asset is used for both business and personal purposes, only the business-use portion can be claimed.

Many businesses use accounting software like Xero, connected to their business transaction account, to automatically record asset purchases and simplify tax time.

What changed in the 2026 Federal Budget?

The 2026 Federal Budget announced a major shift for small businesses - the $20,000 instant asset write-off is expected to become permanent from 1 July 2026. This gives eligible businesses more certainty when planning asset purchases, instead of waiting to see whether the threshold will be extended each year.

Permanent write-off from 1 July 2026

From 1 July 2026, eligible small businesses may be able to immediately deduct the business-use portion of eligible depreciating assets that cost less than $20,000. The measure is intended to be ongoing which can help businesses make longer-term decisions about replacing equipment, investing in tools or upgrading technology with more certainty.

For business owners, that policy certainty can make forward planning easier. Instead of rushing every EOFY to respond to temporary extensions, businesses can consider asset purchases as part of broader cash flow, productivity and growth planning.

EOFY 2025–26 still matters

The current 2025–26 rules still apply until 30 June 2026, so timing remains important. To claim an immediate deduction in the 2025–26 financial year, an eligible asset must have been first used or installed ready for use by 30 June 2026.

Buying or ordering an asset before year-end may not be enough if it is not ready for business use in time. Before making EOFY purchases, businesses should check eligibility, keep accurate records and consider speaking with their accountant or tax adviser.

Who is eligible for the instant asset write-off

To be eligible for the instant asset write-off, your business generally needs to meet a few key rules:

• Your business must have an aggregated annual turnover of less than $10 million.
• Your business must use the simplified depreciation rules. Simplified depreciation rules are a way for eligible small businesses to claim deductions for business assets more easily. They allow some assets to be written off immediately, while other assets are added to a small business pool and depreciated over time. Some assets are excluded from the simplified depreciation rules.
• The asset must be used for business purposes. If the asset is used for both business and personal purposes, you can only claim the business-use portion.

You’ll also need to keep records, such as invoices and receipts, to support your claim.

What assets can your business claim?

The instant asset write-off can apply to a wide range of depreciating assets used for business. This can include both new and second-hand assets, as long as each asset meets the eligibility rules and costs less than the relevant threshold.

Examples of eligible assets

• Business equipment, such as tools, machinery, appliances or a coffee machine.
• Technology, such as laptops, monitors, printers, payment terminals or point-of-sale systems.
• Office furniture and fit-out items, such as desks, chairs, shelving or storage.
• Vehicles used for business, such as utes, vans or cars, noting that special car limits may apply.
• Industry-specific assets, such as salon equipment, kitchen equipment, trade tools or retail display units.

What your business generally can’t claim

Some assets are excluded or have special rules, so it’s important to check before you buy. Items that generally won’t qualify for the instant asset write-off include:

• Buildings and structural improvements.
• Assets that are not used for business purposes.
• Some intangible assets.
• Assets that cost the same as, or more than, the relevant threshold.

If an asset is used partly for personal purposes, you can only claim the business-use portion. If you’re unsure whether an asset qualifies, speak with your accountant or tax adviser before making a purchase.

Key rules you need to know

Before making a claim, use this instant asset write-off checklist to understand the key rules.

Instant asset write-off checklist

• Check the instant asset write-off threshold. The threshold applies to each eligible asset, not your total spend.
• Claim multiple assets if each one qualifies. You may be able to claim more than one asset in the same income year if each asset costs less than the relevant threshold.
• Make sure the asset is ready for use. For the 2025–26 income year, the asset must be first used or installed ready for use by 30 June 2026.
• Only claim the business-use portion. If an asset is used for both business and personal purposes, only the business-use percentage can be claimed.
• Keep accurate records. Keep invoices, receipts and evidence showing when the asset was purchased, installed and used for business.
• Check if special rules apply. Some assets, such as cars, buildings, structural improvements and certain intangible assets, may have limits or may not qualify.

How the instant asset write-off works

Here’s a simple example of how the instant asset write-off could work in practice.

Case study: A café buys a new coffee machine

A small café buys a new coffee machine for $15,000 to keep up with customer demand. The business pays for the machine using its business transaction account, so the purchase is recorded separately from personal expenses.

Because the café has connected its business account to accounting software, the transaction flows through automatically. The owner or bookkeeper can then categorise the purchase as a business asset and keep the invoice with their records.

If the coffee machine is installed and ready for use before the end of the financial year and the café meets the eligibility rules, the business may be able to claim an immediate deduction of the $15,000 cost at tax time.

This can reduce the café’s taxable income for that year, while helping the business invest in equipment that supports sales, productivity and future growth. The café should speak with its accountant or tax adviser to confirm eligibility before making a claim.

How an instant asset write-off can help your business’s cash flow

Claiming an instant asset write-off may help improve your cash flow by bringing forward a tax deduction for eligible business assets. Instead of claiming depreciation over several years, you may be able to claim the business-use portion of the asset’s cost in the year it’s first used or installed ready for use.

Common mistakes to avoid

A few simple checks can help you avoid common instant asset write-off mistakes at tax time.

Buying an asset but not having it ready for use before EOFY

Ordering or paying for an asset before 30 June may not be enough. To claim an instant asset write-off for the 2025–26 income year, the asset generally needs to be first used or installed ready for use by 30 June 2026.

Assuming every purchase qualifies

Not all business purchases are eligible for an immediate deduction. The asset must meet the relevant rules, including the threshold, business-use requirements and any exclusions or special limits that apply.

Mixing personal and business use

If an asset is used for both business and personal purposes, you can only claim the business-use portion. Keep clear records showing how the asset is used, so you or your accountant can work out the right amount to claim.

How NAB can help

NAB can help you prepare for EOFY by giving you tools and support to manage spending, stay organised and plan for business purchases.

• Manage cash flow
  Use a NAB business transaction account to track spending, separate business and personal finances and keep a clearer view of money coming in and going out.
• Stay organised at tax time
  Connect your business account to accounting software to help record transactions, categorise expenses and reduce manual admin.
• Fund business purchases
  If you’re planning to buy equipment, tools, technology or vehicles before EOFY, explore NAB business loans or asset finance options that may help spread the cost while supporting your cash flow.
• Talk to a NAB business banker
  Speak with a NAB business banker about managing cash flow, funding business purchases and planning for EOFY.