You have decided your business needs a new piece of kit — a ute, a laptop, a coffee machine, a set of tools. The good news is that the cost is usually deductible. The question is when you get the deduction. Normally you claim it slowly, a slice each year. The instant asset write-off can let you claim the whole business portion in one go, in the year you buy. For cash flow, that can make a real difference. Here is how it actually works, in plain English.
What the instant asset write-off actually is
Ordinarily, when you buy equipment for your business, you do not deduct the full cost straight away. Instead you claim depreciation — a portion of the cost each year over the asset's effective life. It is fair, but it means waiting years to feel the full tax benefit.
The instant asset write-off changes that for eligible small businesses and eligible assets. If an asset costs less than the current threshold, you can deduct the business-use portion immediately in the year you first use it or have it installed ready for use. You bring the whole deduction forward instead of dripping it out over time.
One critical point up front: the threshold amount and the date it applies to change frequently, because they depend on legislation that is updated from year to year. We are deliberately not quoting a dollar figure here, because today's number may not be tomorrow's. Always confirm the current ATO threshold — and that it still applies — before you rely on it for a purchase.
Who is eligible
The write-off is a small business concession. As a general guide, eligibility hinges on your aggregated turnover being under $10 million. "Aggregated" matters: it can include the turnover of businesses connected with or affiliated to yours, not just your own. If you operate through a group of entities, that is worth checking carefully.
- Your business must be carrying on a business and meet the turnover test for the relevant year.
- The asset must be a depreciating asset used for your business.
- The asset's cost must be under the threshold in force at the time — and that threshold can move.
Because the rules and the threshold shift, the safest approach is to confirm both your eligibility and the current amount with us or the ATO before committing to a large purchase.
It works per asset, not per total spend
A common misunderstanding is that the threshold is a budget for the year. It is not. The test applies to each asset individually. If several separate assets each cost under the threshold, you may be able to write off each one — even if they add up to a much larger total.
What counts is the cost of the individual asset. So a single item priced over the threshold does not qualify for the immediate write-off, even if you could have bought two cheaper items instead.
Business use, new and second-hand
You only ever deduct the business-use portion. If you use an asset partly for private purposes, you apportion. Buy a laptop used 70% for the business and 30% personally, and only the 70% is deductible. Keep records that genuinely support how you worked out the split — the ATO expects a reasonable basis, not a guess.
Both new and second-hand assets can qualify under the small business rules, provided the asset and your business meet the conditions. So a quality used piece of equipment is not automatically off the table.
Timing: "installed ready for use" is the trigger
The deduction is tied to when the asset is first used, or installed ready for use, for a taxable purpose — not simply when you paid or placed the order. This catches people out near year-end.
- Paying for an asset in June but not receiving or installing it until July can push the deduction into the next financial year.
- An asset sitting in a box, not yet ready to be used, is generally not "installed ready for use".
- If a threshold change is looming, buying just before or just after the change date can materially affect what you can claim.
If timing is important to you, talk to us before you buy. Getting the date right is often the difference between claiming now and claiming later.
What happens to assets over the threshold
An asset that costs the threshold or more is not lost — you just cannot write it off immediately. Instead it is depreciated over time in the normal way. For many small businesses, assets over the threshold are allocated to a small business depreciation pool and deducted at set pooled rates rather than item by item. The exact treatment depends on the rules that apply for the year, so it is worth confirming how a particular asset should be handled.
Where we fit in
The instant asset write-off is genuinely useful, but the moving threshold, the eligibility tests and the "ready for use" timing rule mean it rewards a bit of planning. If you are weighing up a purchase and want the timing and the treatment right, we can help you work through it before you commit.
Book a chat at nebulaaccounting.au or call 0433 822 227.
This article is general information only and does not take account of your personal circumstances — it is not personal tax, financial or legal advice. Tax laws change and apply differently to different people. Nebula Accounting Pty Ltd is a registered tax agent (No. 26259377); please speak with us or check with the ATO before acting.