Permanent $20,000 Instant Asset Write-Off Explained

The permanent instant asset write-off 2026 is now law — or at least, it will be once the Budget delivered on 12 May 2026 passes Parliament. The Australian Government confirmed in its 2026-27 Federal Budget that the $20,000 instant asset write-off (IAWO) will be made permanent from 1 July 2026, ending the annual cycle of extensions and sunset clauses that has made planning difficult for small businesses since the scheme was expanded during COVID. If you’ve been using the IAWO for years without thinking much about it, not much will change day-to-day. But if you’ve ever delayed an equipment purchase because you weren’t sure whether the scheme would still exist next financial year, that uncertainty is now gone.

For a full explanation of how the scheme works, see our instant asset write-off guide for small businesses — this post focuses specifically on what the Budget changed and what it means for your planning.

Disclaimer: This article provides general information only and does not constitute tax advice. Consult a registered tax agent for advice specific to your circumstances.

What the Budget Actually Changed

The headline is straightforward: the $20,000 threshold is not changing. What the Budget changed is the nature of the scheme — from a temporary measure that requires annual re-legislation to a permanent feature of the tax system.

According to Budget Paper No. 2 (2026-27), the Government has committed to making the instant asset write-off a standing element of the simplified depreciation rules for small business entities. Previously, the scheme operated on a year-by-year basis — Parliament would legislate the threshold and sunset date, businesses would scramble to understand the rules before EOFY, and then the whole process would repeat. The $20,000 threshold itself has existed in various forms for years, but each extension added administrative friction and uncertainty.

From 1 July 2026, eligible small businesses will no longer need to check whether the IAWO has been renewed. It will simply be there — the same way the general depreciation pool has always been there. The practical difference for most businesses is not a larger deduction in any given year, but the ability to plan asset purchases across multiple financial years without wondering whether the scheme will still apply when the equipment arrives.

This matters most for staged purchases and capital planning. If you’re a tradie refurbishing a workshop over two financial years, or a medical practice upgrading equipment incrementally, the old uncertainty created a real risk: what if you commit to stage one in FY2026-27, but the IAWO lapses before stage two in FY2027-28? That risk disappears under a permanent scheme.

The Government has framed this as a productivity measure — encouraging small businesses to invest in equipment and technology without waiting for end-of-year deadline pressure. Whether or not you buy into that framing, the practical effect for any business with aggregated turnover under $10 million is welcome certainty.

Who’s Eligible for the Permanent IAWO

The eligibility rules are unchanged. The permanent scheme carries forward the same criteria that apply to the current IAWO.

Aggregated turnover under $10 million test

Your business must be a small business entity with aggregated annual turnover under $10 million. The “aggregated” part catches businesses that are connected or affiliated with larger entities — if you’re a sole trader with a minority stake in a family company, that company’s turnover may count toward your test. For most pure small businesses, this isn’t an issue, but if your business is part of a group, check the aggregated turnover calculation before assuming eligibility. Sole traders are included provided they meet the turnover test and use the simplified depreciation rules.

Per-asset $20,000 threshold (not pooled)

The $20,000 threshold applies per asset, not as an annual cap. You can write off ten separate assets in the same financial year provided each individual asset costs less than $20,000. If you’re registered for GST, the threshold applies to the GST-exclusive price. If you’re not GST-registered, it applies to the full price including GST.

Assets costing $20,000 or more don’t qualify for the instant write-off — they go into the small business depreciation pool and are written down at 15% in the first year, then 30% each subsequent year. The $20,000 boundary is firm; there’s no rounding or discretion.

Asset must be installed ready for use in the income year

Timing drives the claim. The asset must be first used, or installed ready for use, during the income year for which you’re claiming the deduction. Buying an asset in June and having it sit in a box until July means the claim falls into the next financial year. For complex equipment requiring professional installation — commercial kitchen equipment, industrial machinery, specialised medical devices — the installation completion date, not the invoice date, determines which year the deduction belongs to.

Both new and second-hand assets qualify. The ATO confirms that the simplified depreciation rules, including the instant write-off, apply to second-hand assets as long as the other eligibility tests are met.

What’s Genuinely New vs Marketing Spin

Let’s be direct about what the Budget announcement actually delivers, because the coverage tends to overclaim.

The threshold is not increasing. A $19,500 piece of equipment was writeable-off before this Budget and will be writeable-off after it. The deduction you’ll receive in FY2026-27 for an eligible asset purchase is identical to what you’d have received in FY2025-26.

What’s new is the removal of sunset-clause risk. That’s genuinely useful for planning, but it doesn’t change your current-year tax outcome by a single dollar. If a supplier, accountant, or news headline implies the Budget has made the IAWO “bigger” or “more generous,” treat that with scepticism — the number is unchanged.

Where the permanence does matter is for businesses making multi-year capital decisions. Equipment finance, staged upgrades, fleet refreshes — these are scenarios where uncertainty about future-year rules changes the economics. A permanent scheme makes the calculation simpler and allows businesses to commit to longer-term asset plans without the annual legislative guessing game.

How to Plan Asset Purchases Around 1 July 2026

For purchases you’re considering in the next few months, the threshold is the same on both sides of 1 July 2026. If a $15,000 piece of equipment is eligible under the current IAWO for FY2025-26, it’s equally eligible under the permanent IAWO for FY2026-27. The only question is cash flow timing and your own tax position — not scheme availability.

Use our instant asset write-off calculator to model the after-tax cost of an asset purchase against your marginal rate and expected taxable income.

Where the permanence creates genuine planning opportunity is in multi-year programs. A building contractor planning a $60,000 equipment refresh — say, four separate items at $15,000 each — can now spread those purchases across three or four financial years and apply the IAWO to each one, without any risk that the scheme lapses partway through. Previously, the rational move was to front-load purchases before a known sunset date, which created cash flow pressure and sometimes meant buying equipment before you actually needed it.

For businesses with lumpy income — seasonal trades, project-based businesses, consultants — the permanence also makes it easier to align asset purchases with high-income years. If you know FY2027-28 will be a strong year, you can plan to make eligible purchases then to maximise the deduction value. You’re no longer constrained to rush purchases into a particular year just because the scheme might not exist in the one after.

One timing note: assets purchased before 30 June 2026 are governed by the current IAWO settings, including any conditions attached to the current legislative instrument. The “permanent” designation formally takes effect from 1 July 2026. For FY2025-26, everything works exactly as it did before the Budget.

What Records You Need to Keep

The record-keeping requirements for the permanent IAWO are identical to the current scheme. The ATO has not announced any changes to documentation obligations, and the simplified depreciation rules carry forward unchanged.

For each asset you write off, keep:

• Purchase invoice — supplier name, date of purchase, description of the asset, and the amount including any GST separately identified. If you’re GST-registered, the invoice must be a valid tax invoice.
• Proof of installation or first-use date — delivery dockets, installation completion records, or a contemporaneous dated note. The date on the invoice is not sufficient on its own if the asset wasn’t operational until later.
• Business-use percentage — if an asset is used partly for personal purposes, you can only claim the business-use portion. Keep a log or diary showing how the asset is actually used.
• Records of disposal — if you later sell, scrap, trade in, or stop using the asset for business, record what happened and when. There may be tax consequences on disposal.

Records must be kept for five years from the date you lodge the relevant tax return. Digital copies are accepted and, in practice, more durable than paper. For a detailed breakdown of what to document and how to organise it, see our IAWO record-keeping checklist.

Taxr’s AI scanner captures the vendor, date, and amount from a receipt in seconds and stores the digital copy against your expense record — meaning the documentation burden for each asset purchase is a ten-second scan rather than a filing project. Use the instant asset write-off calculator alongside your records to estimate the deduction value before lodgement.

How This Interacts with Loss Carry-Back

For companies with aggregated turnover below $1 billion, the Budget also confirmed loss carry-back arrangements. If a year of heavy IAWO spending produces a tax loss, that loss can now be carried back to offset taxable income from prior years, generating a refundable tax offset.

In practical terms: if your company spends heavily on eligible assets in FY2026-27, drops into a tax loss, and had profitable years in FY2024-25 or FY2025-26 where you paid company tax, the loss carry-back allows you to recover some of that prior tax paid as a cash refund. Combined with the permanent IAWO, this creates a more powerful toolkit for companies making significant asset investments in a single year.

The interaction is worth discussing with your accountant if your company is planning a substantial capital outlay. The carry-back rules have their own eligibility tests and limits, and modelling the combined effect requires looking at your specific profit and loss history. See our loss carry-back guide for companies for the full breakdown.

Frequently Asked Questions

Is the $20,000 instant asset write-off threshold increasing?

No. The threshold stays at $20,000 per eligible asset. What’s new is permanence — instead of being legislated each year with a sunset clause, the IAWO is now indefinite from 1 July 2026. The deduction amount for any given eligible asset purchase is unchanged.

Who qualifies for the permanent IAWO?

Eligible small businesses with aggregated turnover under $10 million. The asset must be first used or installed ready for use during the income year you’re claiming. Sole traders, partnerships, companies, and trusts all qualify provided they meet the turnover test and use the simplified depreciation rules.

Does the permanent IAWO apply to second-hand assets?

Yes. Both new and second-hand assets qualify, provided they cost less than $20,000 each (excluding GST if you’re registered) and meet the eligibility tests. There is no distinction between new and used equipment under the simplified depreciation rules.

Can I write off a vehicle under the IAWO?

A vehicle costing under $20,000 (excluding GST) and used in your business can be written off. The car cost limit — currently $69,674 for 2025-26 — caps depreciation on more expensive passenger vehicles, but it doesn’t change the IAWO threshold itself. A second-hand ute or van costing $18,500 is fully eligible.

What if I buy an asset before 30 June 2026?

The current IAWO settings apply for FY2025-26 purchases. The ‘permanent’ designation kicks in from 1 July 2026, removing the year-by-year sunset uncertainty. There is no practical difference in the deduction you’ll receive — the rules and threshold are the same either side of that date.

Do I need to pool assets above $20,000?

Yes. Assets costing $20,000 or more enter the small business depreciation pool and are written down at 15% in the first year, 30% per year thereafter. The $20,000 boundary is a hard cut-off — there’s no partial instant write-off for assets that slightly exceed the threshold.

Capture every IAWO-eligible purchase the moment it happens. Taxr’s AI scanner extracts the date, amount, and vendor in seconds, categorises it for your tax return, and exports cleanly to your accountant. Download Taxr and stop losing receipts to faded ink.