Eternity Group

Regulatory Update

Instant asset write-off for 2026-27: permanent $20,000 threshold enacted

The permanent $20,000 instant asset write-off has been enacted by the Treasury Laws Amendment (Tax Reform No. 2) Act 2026. Schedule 2 commences on 1 October 2026, with the principal asset-threshold rule applying to assets first used or installed ready for use from 1 July 2026.

Published Updated Sources verified 5 min read

Applies to: FY2025-26 and FY2026-27. Act No. 71 of 2026 received assent on 26 August 2026; Schedule 2 commences on 1 October 2026 and applies the principal asset threshold to relevant use or installation from 1 July 2026. · Australia

The direct answer

As at 3 September 2026, Parliament has enacted a permanent $20,000 instant asset write-off threshold for eligible small business entities using simplified depreciation. Schedule 2 of Act No. 71 of 2026 commences on 1 October 2026, but its application provision applies the key threshold to depreciating assets first used, or first installed ready for use, for a taxable purpose on or after 1 July 2026.

Key points

  • For 2025-26, eligible small businesses can immediately deduct depreciating assets costing less than $20,000 each if they were first used or installed ready for use for a taxable purpose by 30 June 2026. That extension was enacted by Act No. 72 of 2025.
  • For 2026-27, the general instant asset write-off threshold has been increased from $1,000 to $20,000 by Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 2) Act 2026, No. 71 of 2026.
  • Schedule 2 commences on 1 October 2026, but item 15 applies the amended asset threshold to assets first used or first installed ready for use for a taxable purpose on or after 1 July 2026.
  • Eligibility still requires a small business entity with aggregated turnover under $10 million that chooses the simplified depreciation rules for the relevant income year. The threshold is tested per asset, and the asset must cost less than $20,000 for threshold purposes.
  • Assets that do not qualify for immediate deduction generally enter the general small business pool. The low-pool-value threshold is also changed to $20,000 for relevant assessments, while the usual 15% first-year and 30% later-year pool rates remain important.
  • An immediate deduction reduces taxable income; it is not a cash payment and does not make an unnecessary purchase economical. Business need, cash flow, private use, GST treatment and the date the asset is first used or installed still matter.

Where the threshold stands as at 3 September 2026

The instant asset write-off position changed after this resource’s 19 August review. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026 received Royal Assent on 26 August 2026, so the permanent $20,000 threshold is no longer merely an announced measure or a Bill before Parliament.

Instant asset write-off threshold status as at 3 September 2026
Income yearThreshold per assetStatus
2025-26 — asset first used or installed ready for use by 30 June 2026Less than $20,000Enacted temporary extension — Act No. 72 of 2025
2026-27 — asset first used or installed ready for use from 1 July 2026Less than $20,000Enacted permanent threshold — Act No. 71 of 2026; Schedule 2 commences 1 October 2026

Assent, commencement and application are different dates

Act No. 71 received assent on 26 August 2026. Schedule 2 commences on 1 October 2026. Item 15 nevertheless applies the principal asset-threshold amendment to assets first used or first installed ready for use for a taxable purpose on or after 1 July 2026.

2025-26: the temporary $20,000 extension

For 2025-26, Act No. 72 of 2025 extended the temporary $20,000 threshold to eligible depreciating assets first used or first installed ready for use for a taxable purpose by 30 June 2026. The threshold is less than $20,000 per asset, not $20,000 or less.

An entity must be a small business entity and use the simplified depreciation rules for the relevant income year. The deduction is limited to the asset’s taxable-purpose proportion, and the cost tested against the threshold may require adjustment for matters such as input tax credits.

2026-27: the permanent threshold has been enacted

Schedule 2 of Act No. 71 of 2026 replaces the relevant $1,000 amounts in Subdivision 328-D with $20,000. Item 15 applies paragraph 328-180(1)(b) to depreciating assets first used or first installed ready for use for a taxable purpose on or after 1 July 2026.

  • Immediate deduction threshold: less than $20,000 per eligible asset.
  • Additional cost amounts: the amended thresholds apply to relevant second-element costs included on or after 1 July 2026.
  • Low-pool-value write-off: the $20,000 amendment applies to assessments for income years ending on or after 1 July 2026.
  • Transitional treatment: Schedule 2 changes the increased-access-year references from 2026 to 2027.

The threshold is not a cash rebate

An immediate deduction reduces assessable taxable income subject to the business’s actual tax position. It does not reimburse the purchase price, and a deduction may have little immediate value where the entity has losses or insufficient taxable income.

Timing, pooling and the records that support the claim

The critical timing event is first use or first installation ready for use for a taxable purpose. Purchase orders, payment dates and delivery dates can be relevant evidence, but none automatically replaces the statutory first-use or ready-for-use test.

An asset that does not qualify for immediate deduction will generally be allocated to the general small business pool if the entity uses simplified depreciation. The taxable-purpose value is generally deducted at 15% in the first pool year and 30% of the opening pool balance in later years, subject to the detailed rules.

Keep evidence for each asset

  • Tax invoice, contract and proof of payment
  • Asset description and cost calculation used for the threshold test
  • Date and evidence of first use or installation ready for use
  • Business-use or taxable-purpose percentage
  • Aggregated-turnover and simplified-depreciation working papers

How the 2026-27 position changed

  1. 12 May 2026 — Budget announcement. The Government announced that it intended to make the $20,000 threshold permanent from 1 July 2026.
  2. 25 June 2026 — Bill introduced. The Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 was introduced and referred for committee consideration.
  3. 19 August 2026 — Senate passage stage. The Senate second reading occurred after the committee recommended that the Bill be passed.
  4. 26 August 2026 — Royal Assent. The Bill became Act No. 71 of 2026. The prior “not yet law” status ceased to be correct.
  5. 1 October 2026 — Schedule 2 commencement. Schedule 2 commences, with item 15 applying the principal threshold to qualifying use or installation from 1 July 2026.

Hypothetical example — an $18,500 asset first installed in July 2026

“Harbour Lane Joinery Pty Ltd” is fictitious. Assume it is an eligible small business entity using simplified depreciation and that the threshold cost of a bench saw is $18,500 with 100% taxable use. If the saw is first installed ready for use on 15 July 2026, item 15 of Schedule 2 applies the legislated $20,000 threshold from that date, so the $18,500 may be immediately deductible in 2026-27. If the relevant threshold cost were exactly $20,000, it would not satisfy a “less than $20,000” test. Figures are illustrative only and specific outcomes depend on the facts.

This example is entirely hypothetical and illustrates the mechanics only. It is not a client outcome, a prediction, or advice.

Records to retain for the 2026-27 threshold

  • Tax invoice, purchase contract and proof of payment for each asset
  • Evidence of delivery, installation and first business use
  • Working paper showing cost for threshold purposes and any GST adjustment
  • Business-use or taxable-purpose calculation
  • Aggregated-turnover and connected-entity analysis
  • Record of the simplified-depreciation choice for the relevant income year

Limitations of this information

  • This is a point-in-time legal status report verified on 3 September 2026. Schedule 2 has received Royal Assent but does not commence until 1 October 2026; the resource should be rechecked after commencement and against any updated ATO administration guidance.
  • This resource does not determine the threshold cost of a particular asset, GST treatment, taxable-purpose proportion, excluded-asset rules, balancing adjustments, motor-vehicle cost limits or whether an entity has validly chosen simplified depreciation.
  • The instant asset write-off is an income-tax deduction, not a grant or cash reimbursement. The commercial decision to acquire an asset should not be based on the deduction alone.
  • The worked example is hypothetical, ignores GST for simplicity and is not a forecast or representation of a client outcome.

Practical next steps

  1. Confirm the entity is a small business entity and has chosen simplified depreciation for the relevant income year.
  2. Test each asset separately using the correct threshold cost and taxable-purpose proportion.
  3. Keep evidence of the date the asset was first used or first installed ready for use, not only the order or payment date.
  4. For a material purchase, reconcile the enacted rules with cash flow and the business purpose before committing — our small business accounting and business tax planning services can assist, or contact the practice.

Frequently asked questions

What is the instant asset write-off threshold for 2025-26?

For the income year ended 30 June 2026, the threshold is $20,000 per asset. Schedule 7 of Act No. 72 of 2025 extended the temporary threshold to depreciating assets first used, or first installed ready for use, for a taxable purpose by 30 June 2026.

What is the instant asset write-off threshold for 2026-27?

The legislated threshold is $20,000 per asset for eligible small business entities using simplified depreciation. Schedule 2 of Act No. 71 of 2026 commences on 1 October 2026, and item 15 applies the key asset-threshold amendment where the asset is first used or first installed ready for use for a taxable purpose on or after 1 July 2026.

Who can use the instant asset write-off?

Broadly, a small business entity carrying on a business with aggregated turnover of less than $10 million that chooses the simplified depreciation rules in Subdivision 328-D for the relevant income year. Aggregated turnover includes the turnover of connected and affiliated entities, and other asset-specific conditions may apply.

Does the $20,000 threshold apply per asset or in total?

Per asset. Each depreciating asset is tested separately. Several assets may qualify in the same income year if each costs less than $20,000 for threshold purposes and the other eligibility and timing conditions are met.

Can I rely on the $20,000 threshold for an asset first used in July 2026?

The measure has been enacted. Although Schedule 2 commences on 1 October 2026, item 15 expressly applies the amended paragraph 328-180(1)(b) threshold to an asset first used or first installed ready for use for a taxable purpose on or after 1 July 2026. Eligibility, business-use and cost questions still require analysis of the actual asset and entity.

Does buying or paying for an asset before 30 June qualify it for that year?

Not by itself. The immediate-deduction timing test turns on when the asset is first used or first installed ready for use for a taxable purpose. An asset ordered or paid for before 30 June but not used or installed ready for use until July generally falls into the next income year.

Official sources

The facts in this resource are drawn from the following official sources, each read on the date shown. If a source has changed since, the source prevails.

Discuss your situation with us

This resource is general information for Australian residents, not tax advice. It does not consider your circumstances, and tax outcomes depend on individual facts. Speak to a registered tax agent before acting. It is also not financial product advice — we are not an Australian financial services licensee. Decisions about superannuation or other financial products should be discussed with a licensed financial adviser.

Reviewed and approved by Rohan Manokaran · Next scheduled review by 2 October 2026 · Update sensitivity: high

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