The $20,000 Instant Asset Write-Off Is Permanent - But That Does Not Mean You Should Spend $20,000
Written by: Melissa Cunliffe (CA)
The $20,000 Instant Asset Write-Off Is Permanent - But That Does Not Mean You Should Spend $20,000
The $20,000 instant asset write-off has become a permanent feature for eligible small businesses. That is useful certainty. It is not permission to spend $20,000 simply because the accountant said there is a deduction available.
Treasury data released in October shows around 300,700 instant asset write-off claims worth more than $4.3 billion were made in 2024-25. Agriculture recorded the highest value of assets claimed: around 32,600 claims worth $808.7 million.
A deduction is not a reimbursement
If a company subject to a 25% tax rate spends $20,000 on a fully deductible eligible business asset, the tax effect may be around $5,000, subject to the business's circumstances and the tax rules. The business has still spent $20,000 of cash. The deduction changes the after-tax cost; it does not make the asset free.
The first question is commercial
Will the asset save labour, increase capacity, reduce breakdown risk, improve quality, create new revenue or replace something that genuinely needs replacing? If not, tax should not manufacture a business case that is otherwise absent.
The write-off is mainly about timing
Without an immediate deduction, a depreciating asset is generally written off over time under the relevant tax rules. Immediate expensing can accelerate the deduction into the year of acquisition where the conditions are met. That timing can help cash flow, but it does not change a poor investment into a good one.
The threshold applies asset by asset
Eligibility, cost calculation, taxable-use percentage, timing and the small-business entity rules all matter. Businesses should also be careful where an asset costs more than the threshold or where private use is involved.
Three questions before buying
Ask: Do we need it? What commercial return will it produce? What is the after-tax cash cost? If the answers stack up, the tax deduction can improve the timing of a good decision rather than being the reason for the decision.
Where the 4P's Future Prosperity Framework fits
People: Buy assets that make work safer, easier or more productive for the people in the business.
Preserve: Preserve cash by separating tax savings from total purchase cost.
Protect: Check eligibility and avoid unnecessary year-end spending.
Prosper: Invest in assets that produce measurable capacity or profit.
FAQs / People Also Ask
Is the $20,000 instant asset write-off permanent?
The 2026 reforms made the $20,000 threshold permanent for eligible small business entities, subject to the legislation and conditions.
Does the government pay for 25% of the asset?
No. A tax deduction reduces taxable income; it is not a cash reimbursement.
Can I claim an asset used partly privately?
The deduction is generally limited to the taxable-use portion, subject to the relevant rules.
Considering an asset purchase before the end of the financial year? Make sure the investment makes commercial sense beyond the tax deduction. Reviewing eligibility, cash flow and expected returns can help you make a more informed decision.
Contact 4P's Future Accounting to discuss your business's tax and investment planning.
Disclaimer
This article does not constitute financial advice and is for general information only. It does not take into account any individual’s personal objectives, situation or needs, and is not intended as professional advice. Any similarity to an individual’s personal circumstances and the examples provided in this article is purely coincidental. Any person acting upon such information without receiving specific advice, does so entirely at their own risk.
Authorisation under an Australian Financial Services Licence (AFSL) is not required in the provision of this article and the author plus Future Accounting Group Pty Ltd is not acting in its capacity as an Australian Financial Services Licence holder
Liability limited by a scheme approved under professional standards legislation.
