What is the instant asset write off
The instant asset write off allows eligible businesses to claim an immediate tax deduction for the business portion of a depreciating asset in the year the asset is first used or installed ready for use. Rather than claiming depreciation over several years, the full deductible amount can be claimed upfront, helping to improve cash flow and reduce taxable income.
The write off can be applied to multiple assets, provided each individual asset is below the relevant threshold. It applies to both new and second hand assets, making it a flexible option for businesses investing in equipment, tools, or technology.
Who qualifies for the instant asset write off
Any small business that uses the simplified depreciation rules can access the instant asset write off. A small business is defined as one with aggregated annual turnover of less than $10 million.
Aggregated annual turnover includes the turnover of your business as well as any connected entities and affiliates. While these definitions can be complex, in simple terms:
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A connected entity is one that controls, or is controlled by, your business, or where the same entity controls both businesses
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An affiliate is an individual or company that acts in line with your business’s directions or in close cooperation with your business
Understanding these relationships is important, as they directly affect eligibility.
What assets are eligible
The instant asset write off applies to eligible depreciating assets that cost less than the specified low cost asset threshold. This threshold has changed over time. It was originally $1,000, increased to at least $20,000 from May 2015, and reached as high as $150,000 before being replaced by temporary full expensing, which ended on 30 June 2023.
For the 2023–24 tax year, the Federal Budget announced a $20,000 threshold. This measure has been announced but is not yet legislated. If enacted, the $20,000 threshold will apply for a 12 month period, meaning assets must be acquired and first used or installed ready for use between 1 July 2023 and 30 June 2024 to qualify.
The threshold applies per asset, allowing small businesses to instantly write off multiple qualifying purchases in the same year.
Additional expenditure and exclusions
In certain circumstances, additional expenditure incurred on an existing low cost asset may also qualify for an immediate deduction under the instant asset write off rules.
However, the write off does not apply to all assets. Excluded assets include:
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Assets leased out for more than 50% of the time under a depreciating asset lease
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Horticultural plants, including grapevines
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Software allocated to a software development pool
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Assets used in research and development activities
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Capital works such as buildings and structural improvements
Planning considerations for businesses
Timing is critical when relying on the instant asset write off. Businesses should ensure assets are not only purchased but also first used or installed ready for use within the eligible period. Given the frequent changes to thresholds and eligibility, reviewing planned asset purchases as part of broader tax and cash flow planning can help maximise the benefit while remaining compliant.
Speak to one of our accountants if you have any questions about the changes in instant assets write-offs.
