In October 2025, a Bill was passed by the lower house of the Commonwealth Parliament extending the $20,000 instant asset write-off for small business entities. The instant asset write-off measure supports small businesses by allowing eligible depreciating assets, each costing less than a threshold amount (currently $20,000 excluding GST), to be immediately deducted.
A small business entity that has elected to use the simplified depreciation rules in Subdivision 328-D of the Income Tax Assessment Act 1997 (ITAA 1997) for an income year may immediately deduct or ‘write off’ the taxable purpose proportion of the cost of an asset acquired for less than a threshold amount.
Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025 (the Bill) amends the Income Tax (Transitional Provisions) Act 1997 to extend the $20,000 instant asset write-off for small businesses (with annual turnover under $10 million) by 12 months until 30 June 2026.
Eligible assets must be first used or installed ready for use on or before 30 June 2026.
Assets costing $20,000 or more can be placed into the small business simplified depreciation pool and be depreciated at 15% in the first income year, and 30% each income year thereafter.
Example 7.1 in the Explanatory Memorandum to the Bill provides,
“Kylie, a florist (a small business entity), has elected to use the simplified depreciation rules.
Assets below the threshold
On 1 September 2025, Kylie purchases and installs a new flower display fridge for $4,000 to be used 100 per cent for business purposes. Kylie can use the instant asset write-off to immediately deduct the full cost of the fridge as it is below the asset threshold of $20,000.
Assets exceeding the threshold
On 1 December 2025, Kylie purchases a van for $50,000. She estimates she will use the van 50 per cent of the time for her business for the delivery of flowers, and 50 per cent for private purposes.
Kylie cannot use the instant asset write-off as the total cost of the van ($50,000) exceeds the asset threshold of $20,000. Instead, the $25,000 taxable purpose proportion of the cost of the van ($50,000 multiplied by 50 per cent) is allocated to Kylie’s general small business pool. Kylie can claim a deduction of $3,750 (15 per cent multiplied by $25,000) in her 2025-26 income tax return.<
Deductions for later income years will be calculated as 30 per cent of the opening pool balance of Kylie’s general small business pool.”
According to the second reading speech, up to 4 million small business with aggregate turnover of less than $10 million dollars will be able to immediately deduct assets costing less than $20,000 until 30 June 2026.
This measure was announced on 4 April 2025. On 9 October 2025, the Bill was passed by the lower house of the Commonwealth Parliament.
The measure applies to eligible depreciating assets first used or first installed ready for use for a taxable purpose in the period from 1 July 2025 until 30 June 2026.
Next steps
Please contact your trusted Nexia advisor if you would like more information or guidance on the new instant asset write-off rules.
