Instant asset write-off allows eligible businesses to immediately deduct the full cost of a qualifying asset in the year of purchase, rather than depreciating it over several years. When it applies, it is a significant cash flow benefit — but the rules have changed frequently, and bookkeeping an asset under the wrong rule creates income tax errors that can persist across multiple years.
This guide explains the current rules, how to identify whether an asset qualifies, and how to code it correctly.
The 2026 position: $20,000 threshold for small business
For the 2024–25 and 2025–26 financial years, the instant asset write-off threshold for small businesses (aggregated turnover under $10 million) is $20,000 per asset.
Assets costing $20,000 or more (including GST, for businesses not registered for GST, or excluding GST for GST-registered businesses) must be depreciated under the small business depreciation pool rules or the general depreciation rules.
Important: The $20,000 threshold applies per asset, not per purchase order. A business that buys four $18,000 computers in a single transaction has four qualifying assets — each under the threshold and each immediately deductible.
Assets used partly for business and partly for private purposes must be apportioned — only the business use percentage is deductible.
Historical context: the thresholds have changed significantly
Bookkeepers working with clients who have purchased assets in recent years need to know which threshold applied in each period, because assets purchased in prior years under different rules may still be in the fixed asset register:
| Period | Threshold | Eligible businesses |
|---|---|---|
| Pre-2020 | $30,000 | Turnover < $50M |
| March 2020 – June 2023 | $150,000 (temporary full expensing lifted to no limit) | Turnover < $5B (temporary) |
| 2023–24 | $20,000 | Turnover < $10M |
| 2024–25 | $20,000 | Turnover < $10M |
| 2025–26 | $20,000 | Turnover < $10M |
The Temporary Full Expensing (TFE) regime that operated from 6 October 2020 to 30 June 2023 allowed businesses with turnover up to $5 billion to immediately deduct the full cost of any eligible depreciating asset, regardless of cost. Assets purchased under TFE during this period were fully deducted in the year of purchase — there is nothing remaining to depreciate.
If a client purchased a $500,000 piece of equipment in 2022 and fully expensed it under TFE, that asset has a tax book value of $0. This will appear in the accounts differently from the accounting treatment, which may still carry it at cost less accounting depreciation.
What qualifies as an eligible asset
Not all assets qualify for instant asset write-off:
Generally eligible:
- Plant and equipment (machinery, tools, vehicles up to the luxury car limit)
- Computer equipment and peripherals
- Office furniture and fittings
- Air conditioning units
- Solar panels (if used for business)
Not eligible (must be depreciated by standard means):
- Horticultural plants
- Capital works (buildings and structural improvements — these use Div 43 deductions)
- Assets held for rental to third parties (by some definitions)
- Intangible assets (goodwill, patents, trademarks — different rules)
- Motor vehicles exceeding the luxury car limit (the excess above the limit is not deductible)
Luxury car limit for 2025–26: $69,674 for standard fuel-efficient vehicles; $89,332 for fuel-efficient vehicles (1 July 2025 figures — confirm with ATO). The instant write-off applies to the cost up to the limit; the excess must be depreciated separately.
How to code asset purchases in bookkeeping
The bookkeeping treatment differs from the tax treatment, and both need to be correctly recorded:
Accounting treatment (appears in the financial statements): An asset is capitalised in the balance sheet at its purchase cost. Depreciation is charged over the asset's useful life (usually based on the ATO's effective life estimate or the business's own assessment). This affects the profit and loss account through annual depreciation charges.
Tax treatment (affects the tax return, not directly the books): Under instant asset write-off, the full cost is deducted in the year of purchase for tax purposes. This creates a timing difference between accounting depreciation and tax depreciation — a temporary difference that the tax agent will reconcile in the tax return.
Bookkeeping steps:
- Code the purchase of the asset to a fixed asset account (e.g., "Plant & Equipment" or "Computer Equipment") at the full purchase price
- Record the ITC on the GST component if applicable (code the GST portion as an input tax credit, CAP code)
- Do NOT code the asset directly to an expense account — the accounting treatment is capitalise-and-depreciate
- At year-end, the tax agent will apply the instant write-off treatment in the tax return
A common bookkeeping error is coding an eligible asset directly to an expense account on the assumption that because it qualifies for instant write-off, it's "just an expense." Instant write-off is a tax deduction, not an accounting treatment. The asset still belongs in the balance sheet.
Small business depreciation pool
For assets that don't qualify for instant write-off (over the $20,000 threshold), small businesses can use the simplified depreciation rules — a single "pool" for all eligible depreciating assets. The pool is depreciated at:
- 15% in the year of entry (regardless of when in the year the asset was purchased)
- 30% per year on the pool balance in subsequent years
The bookkeeper's role is to track which assets are in the pool and their opening pool balance for the tax agent. This is usually maintained in a fixed asset register.
If the pool balance falls below the threshold ($20,000 in 2025–26), the entire remaining pool balance can be immediately deducted — so a pool with a $12,000 balance at year-end can be fully written off.
GST and the CAP code
Assets acquired for business use are coded using the CAP GST code, which tells the accounting system that the purchase is a capital acquisition eligible for a full input tax credit.
Using the CAP code (rather than the standard GST code) ensures the ITC is correctly mapped to the capital acquisitions label on the BAS. Both CAP and GST produce the same ITC outcome — the distinction is for BAS worksheet accuracy. For BAS agents who value clean BAS labels, using CAP for capital assets is best practice.
When to alert the tax agent
Flag the following to the tax agent before year-end:
- Any asset purchase over $5,000 — the tax agent needs to determine the correct depreciation treatment
- Any vehicle purchase — luxury car limit implications need to be assessed
- Any significant leasehold improvement — capital works rules (not instant write-off) apply to building improvements
- Any asset purchased in the final months of the financial year where the purchase date affects the year in which the deduction falls
This article was last reviewed on 27 May 2026. Instant asset write-off thresholds and eligibility rules are updated annually in the Federal Budget. Always confirm current thresholds with the ATO or a registered tax agent. This is general guidance, not specific tax or legal advice.