For more than a decade, Australian small businesses have navigated the $20,000 instant asset write-off as a temporary measure — renewed year by year, sometimes at short notice, and always with the question of whether it would continue. The 2026-27 Federal Budget proposes to end that uncertainty by making the threshold permanent. This article covers what is proposed, what qualifies, and what the permanent status would mean for investment planning.

2026 Federal Budget Proposal: Permanent $20,000 Instant Asset Write-Off

On 12 May 2026, as part of the 2026-27 Federal Budget, the Australian Government announced its intention to make the $20,000 instant asset write-off a permanent feature of the tax system for eligible small businesses, effective from 1 July 2026. The measure is contained in the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, which was introduced into Parliament on 25 June 2026 and is currently before the Senate Economics Legislation Committee. The measure is not yet law. The following reflects the proposal as announced and introduced into Parliament.

What the measure proposes

Under the proposed measure, small businesses with an aggregated annual turnover of less than $10 million would be able to immediately deduct the full cost of eligible depreciating assets costing less than $20,000, provided the asset is first used or installed ready for use in the income year in which the deduction is claimed. The $20,000 threshold applies on a per asset basis — multiple assets can each qualify independently, provided each costs less than $20,000.

The measure also extends to the first amount of second element cost incurred on an asset that was previously written off under the simplified depreciation rules in an earlier income year, where that improvement cost is less than $20,000.

What permanence changes

If the proposed measure is enacted, the $20,000 threshold will apply indefinitely — with no sunset clause and no annual renewal required. The practical implications for investment planning are covered in the section below.

The current legal position

Until the Bill receives Royal Assent, the legislated instant asset write-off threshold for assets first used or installed ready for use from 1 July 2026 is $1,000 — not $20,000. Businesses considering purchases in reliance on the proposed $20,000 threshold should confirm the current legislative status at the ATO's guidance page before making commitments.

Eligibility Rules: Which Assets Qualify for the $20,000 Threshold?

The eligibility rules for the proposed permanent measure are consistent with those that applied during the temporary $20,000 threshold period. The following covers the key requirements and the most common areas of confusion.

Business eligibility

To access the instant asset write-off under the proposed measure, a business must:

• Have an aggregated annual turnover of less than $10 million. Aggregated turnover includes the turnover of any entities affiliated with or connected to the business — not just the business's own turnover.

• Be using the simplified depreciation rules for the income year in which the deduction is claimed. This is an active election, not an automatic entitlement.

The measure is available to all business structures — sole traders, partnerships, companies, and trusts — provided the turnover threshold is met and the simplified depreciation rules are in use.

Asset eligibility

Each asset must satisfy the following conditions:

• The total cost of the asset is less than $20,000. For businesses registered for GST, the threshold is applied to the GST-exclusive cost. For businesses not registered for GST, the full purchase price — including GST — is used.

• The asset is first used, or installed ready for use, for a taxable business purpose within the income year in which the deduction is claimed.

• The asset is a depreciating asset used in Australia.

The $20,000 limit applies on a per asset basis. There is no cap on the number of assets that can be written off in a single income year, provided each individual asset costs less than $20,000.

Assets with specific rules or exclusions

Some asset categories are subject to additional rules or are excluded entirely.

Passenger vehicles are subject to the car cost limit, which is indexed annually by the ATO. For the 2026-27 income year the limit is $69,883. Because most passenger vehicles cost well above $20,000, the instant asset write-off is rarely available for this category in practice. Commercial vehicles with a gross vehicle mass of more than one tonne — such as most utes and light trucks configured as light commercials — are generally not subject to the car cost limit and can qualify in full if the purchase price is below $20,000.

Leased assets do not qualify. The instant asset write-off applies to assets that are owned by the business. Where an asset is acquired under a finance lease or other arrangement that does not transfer effective ownership, the write-off is not available.

Building improvements and structural works are not depreciating assets for the purposes of the simplified depreciation rules and are not eligible.

Assets used partly for personal purposes can still qualify, but only the business-use proportion of the cost is deductible. A laptop used 60 per cent for business and 40 per cent for personal use, purchased for $1,800, would give rise to a deduction of $1,080. Businesses should have a reasonable basis for the business-use percentage claimed and maintain records to support it.

Tax Planning Strategy: How Permanence Changes Equipment Purchases

The most significant practical change introduced by the proposed measure is not the $20,000 threshold itself — that has been in place, on a temporary basis, for most of the past decade. The change is the removal of the expiry date.

What changes if the measure is enacted

For small businesses, the year-by-year uncertainty around the instant asset write-off threshold has created a recurring planning problem: purchase decisions have been driven partly by tax calendar pressure rather than commercial need. Businesses have faced the choice of acting before a temporary threshold expired or waiting — at the risk of the threshold dropping — for the next budget announcement.

If the proposed measure passes into law, that pressure is removed. Asset purchases below $20,000 can be planned across financial years based on operational need, cash flow, and business timing — not around budget announcements or sunset clauses. Multi-year equipment upgrade schedules become more straightforward to structure.

What does not change is the requirement that each asset be first used or installed ready for use within the income year in which the deduction is claimed. Even under a permanent measure, a piece of equipment ordered in May but not delivered and installed until August falls into the following income year for write-off purposes. The timing of use or installation — not the timing of purchase or payment — determines which year the deduction applies to.

What to confirm before acting

As noted above, the measure is not yet law. Enactment in the second half of 2026 is anticipated, though the precise timing depends on the parliamentary schedule.

If enacted as proposed, the permanent $20,000 instant asset write-off removes the annual uncertainty that has shaped small business purchasing decisions for years. What changes is the planning horizon: asset investment decisions can be made on commercial grounds, without reference to budget calendars or expiry dates.

For specific advice on eligibility or timing, consult a registered tax agent.

Official sources:

• Australian Taxation Office — $20,000 instant asset write-off (proposed permanent measure)

• Australian Taxation Office — Instant asset write-off for eligible businesses

• Parliament of Australia — Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, Senate Economics Committee

Last updated: August 2026