ATO Instant Asset Write-Off 2025: $20,000 Threshold Guide for Australian Small Businesses

For Australian sole traders, freelancers, and small business owners looking to upgrade your gear, invest in new machinery, or refresh your IT systems, the Instant Asset Write-Off (IAWO) is your most valuable tax tool right now.

The IAWO allows your business to immediately deduct the full cost of eligible depreciating assets—rather than claiming the cost over many years—providing an instant boost to your cash flow and significantly reducing your taxable income.

For the 2024–2025 financial year, the Australian Taxation Office (ATO) has set the limit at $20,000 per asset. This means you can write off multiple items, as long as each one costs less than the threshold.

This comprehensive, ATO-aligned guide breaks down the rules into clear, actionable steps. We’ll show you exactly who qualifies, what assets are eligible, and—most importantly—how to ensure your assets are installed and ready for use before the June 30 deadline to secure your tax saving. Don’t miss this opportunity to invest in your business’s growth while maximizing your tax benefit.

Quick Summary: The 2024–2025 Rules

The Instant Asset Write-Off (IAWO) is a powerful Australian tax incentive allowing eligible small businesses to immediately deduct the full cost of assets.

Eligibility Checklist: Do You Qualify for the $20,000 IAWO?

Before you rush to purchase new equipment, it’s essential to confirm your business meets the ATO’s criteria. Getting this wrong can mean the difference between an immediate cash boost and a messy depreciation schedule.

Aggregated Annual Turnover Limit: The Small Business Definition

You are eligible if your business has an aggregated annual turnover of less than $10 million.

• What is ‘Aggregated Turnover‘? This is your business’s total ordinary income for the year, plus the ordinary income of any other business entity that is connected or affiliated with yours. The ATO uses this measure to ensure only genuine small entities benefit from the simplified rules.

The Critical Timeframe: Installation is Key

The asset must be first used or installed ready for use for a taxable purpose between 1 July 2024 and 30 June 2025.

Crucial Warning: Simply purchasing or invoicing the asset is not enough. If you buy a new piece of machinery in May 2025 but it is not installed, operational, and ready to generate income by midnight on June 30, 2025, you cannot claim the immediate write-off for that financial year.

The Asset Cost Threshold: $20,000 Per-Asset Basis

The cost of the eligible depreciating asset must be less than $20,000.

• Per-Asset Basis: This is excellent news for growth. The limit applies to each individual asset. Your business can purchase and immediately write off multiple assets, provided the cost of each one remains under the $20,000 threshold.
• GST Note: If your business is registered for GST, the $20,000 limit is applied to the GST-exclusive cost (the price before GST). If you are not registered for GST, the limit applies to the full, GST-inclusive cost.

Eligible Assets: What You Can Deduct Immediately

The Instant Asset Write-Off applies to most depreciating assets used to earn assessable income, including both new and second-hand items.

5 Common Assets for Immediate Write-Off (Practical Examples)

These are the items Australian small businesses most commonly write off:

• Technology & Office: New computers, laptops, printers, dedicated server equipment, Point-of-Sale (POS) systems, and specialised software licences.
• Tools & Equipment: Welders, hydraulic lifts, industrial power tools, commercial-grade ovens, fridges, or coffee machines (for a café).
• Vehicles: Utes, trailers, vans, and some light commercial vehicles (if they are under the $20,000 threshold, subject to the Car Limit Trap below).
• Office Furniture: Desks, chairs, filing cabinets, and custom joinery (purchased as individual items).
• Improvements: The first cost of improvement made to an existing asset that was previously written off, provided the improvement cost is also under $20,000.

Specific Exclusions (What You Cannot Claim)

The IAWO is wide-ranging, but there are assets you cannot claim an immediate tax deduction for:

• Trading Stock: Goods held for sale or manufacture.
• Land (and certain intangible assets like goodwill).
• Assets leased out primarily for private use.

Key Financial Considerations & Traps

Don’t let a simple mistake trigger a compliance issue. These three points are where many businesses get caught out.

The Car Limit Trap

While vehicles can be written off, the total claim is capped.

• The ATO’s Car Limit for the 2024–2025 financial year is $69,674.
• If you purchase a vehicle that is designed to carry passengers, costs less than $20,000, and is under the Car Limit, you can deduct the full amount immediately under the IAWO.
• If you buy a high-end passenger vehicle for more than $69,674, the maximum amount you can claim (even through depreciation) is limited to the car limit.

Assets Costing $20,000 or More

The $20,000 limit is strict. What happens to a single asset that costs $20,000 or more (e.g., a $35,000 piece of new machinery)?

• Answer: These assets are not eligible for the Instant Asset Write-Off. Instead, they are placed into the small business depreciation pool and are written off over time (15% in the first year, 30% thereafter). You cannot split the cost of a single asset to meet the threshold.

Business vs. Private Use (The Golden Rule)

The ATO’s three golden rules for deductions still apply:

1. The expense must be for your business.
2. You must have a record to prove it.
3. If the asset is used for a mix of business and private purposes, you can only deduct the business portion of the cost.

For example, if a $15,000 laptop is used 70% for business and 30% for personal use, you can only claim $10,500 (70%) under the IAWO.

Strategic Planning: Maximising Your Deduction Before June 30

The IAWO is a crucial cash flow tool, but it requires planning.

• Plan Purchases Now: Start assessing your needs in the second half of the financial year. Waiting until May or June often leads to supply chain delays, risking the asset not being installed ready for use by the June 30 deadline.
• Keep Your Records: The ATO requires records to substantiate three key details: the purchase price, the date it was installed ready for use, and the percentage of business use. Keep invoices and commissioning reports meticulously.
• The Simplified Depreciation Pool: Don’t forget your existing assets! If you use the simplified depreciation rules, any remaining balance in your general small business pool at 30 June 2025 that is also less than $20,000 can also be written off entirely.

Disclaimer: This is general information only. You should always consult with a qualified Australian Tax Agent or Accountant to confirm your specific eligibility and tax position before making a significant purchase.

Instant Asset Write-Off: FY 2025–2026 Status

The Australian Government has introduced legislation to extend the $20,000 Instant Asset Write-Off (IAWO) for 2025–2026 financial year. As of November 2025, this measure is awaiting full legislative enactment (Royal Assent), but businesses should plan based on its likely continuation.

Key Rules for 2025–2026:

1. Threshold: The limit remains $20,000 per eligible depreciating asset.
2. Eligibility: The deduction applies to small businesses with an aggregated annual turnover of less than $10 million.
3. Timing: The asset must be first used or installed ready for use for a taxable purpose between 1 July 2025 and 30 June 2026.
4. Per-Asset Basis: The limit is applied to each individual asset, allowing eligible businesses to claim the full cost of multiple items.
5. Assets Over $20,000: Any single asset costing $20,000 or more must be placed into the small business simplified depreciation pool and depreciated over time (15% in the first year, 30% thereafter).
6. Pool Write-Off: If the total balance of your simplified depreciation pool falls below $20,000 at the end of the 2025–2026 financial year, you can write off the entire remaining pool balance immediately.

In summary, the $20,000 IAWO is the standard for the 2025–2026 year, providing small businesses with a critical cash flow incentive to invest in equipment before the 30 June 2026 deadline.

$20,000 Instant Asset Write-Off FAQs

Will instant asset write-off be extended to 2026?

In all likelihood, yes, but it is not yet law.

The Extension: The Australian Government has announced an intention to extend the $20,000 threshold for a further 12 months until 30 June 2026. This measure is contained within a Bill that has been introduced to Parliament but has not yet been passed into law.

Without Extension: If the extension is not passed, the threshold would revert to the ongoing legislated level of $1,000 per asset from 1 July 2025.

Action: Businesses should assume the $20,000 limit applies until 30 June 2025. Keep a close watch on legislative updates before making purchases planned for the 2025-2026 financial year.

What deductions can I claim in 2025?

As an Australian sole trader or small business, you can claim any expense that is directly related to earning your income and is not private in nature.

What are the new depreciation rules for 2025?

The main depreciation rules for small businesses (turnover under $10 million) for the current 2024–2025 financial year are centred around the $20,000 Instant Asset Write-Off (IAWO):

• IAWO Limit: Full deduction for eligible assets costing less than $20,000 (per asset).
• Pooling: Assets costing $20,000 or more must be placed into the Small Business General Pool.
• Pool Deduction Rate: Assets in the pool are deducted at 15% in the first year and 30% in subsequent years.
• Pool Write-Off: If the balance of your entire General Pool is less than $20,000 at the end of the year (30 June 2025), you can deduct the entire remaining balance immediately.

What are the tax changes from 1 July 2025 in Australia?

The change from 1 July 2025 marks the start of the 2025–2026 financial year and includes several significant statutory changes

What is a simple trick for avoiding capital gains tax (CGT)?

The simplest, most powerful strategy for individuals and trusts to significantly reduce (not entirely avoid) CGT is the 50% CGT Discount.

• The Trick: Simply hold your investment asset (e.g., shares, investment property) for more than 12 months from the date of acquisition to the date of sale.
• The Benefit: If you hold the asset for over 12 months, you only need to include 50% of the capital gain in your assessable income, effectively halving the tax you pay on that profit.

Another Simple Trick (The Main Residence Exemption):

• The Exemption: If the asset is your main residence for the entire period you own it, you are fully exempt from CGT when you sell.
• The Simple Rule: For homeowners, the best way to avoid CGT is to ensure you never use the property to produce income (e.g., don’t rent out rooms or use a portion for a full-time, dedicated business space).