Australia’s small business instant asset write-off has been temporarily increased again. For the 2024–25 financial year, eligible small businesses can immediately deduct the full cost of any qualifying asset that costs less than $20,000. This means only assets priced under $20,000 (i.e. $19,999.99 or lower) qualify. The 2024–25 Budget extended this $20,000 limit until 30 June 2025. In practice, the write-off allows you to claim a tax deduction up front on the assets you buy for your business, instead of depreciating them over several years.

Who’s Eligible?

• Small business turnover: Your business (and its affiliates) must have an aggregated annual turnover under $10 million. This is the usual threshold for simplified depreciation rules.
• Simplified depreciation rules: You must be using the small business simplified depreciation system (sometimes called the “small business pool” rules) to claim deductions. Most small businesses that meet the turnover test can use these rules.
• Taxable purpose: The asset must be used for a business (taxable) purpose. You can only claim the business portion of the asset’s cost. If an asset has any personal or private use, only the business-use percentage is deductible.

Qualifying Assets and Thresholds

• Cost under $20,000: Each asset must cost strictly less than $20,000 (that is, $19,999.99 or less). The ATO explicitly notes the asset’s full cost must be below the $20,000 cap. (Even if you use GST credits, the threshold test is applied to the net cost as explained below.)
• New or second-hand: Both new and used depreciating assets qualify. There is no requirement that the asset be brand-new.
• Per-asset basis: The $20,000 limit is per asset. You can write off multiple assets in 2024–25 as long as each one individually costs less than $20,000. For example, you could buy three different tools for $18,000 each and write off all of them.
• First used/instalment in 2024–25: The asset must be first used or installed ready for use (for your business) between 1 July 2024 and 30 June 2025. In other words, it must enter service during the 2024–25 year. Simply ordering or paying for the item in advance is not enough – it has to be put to business use in this income year.
• Instalment and improvements count: Remember that the cost of the asset may include not just the purchase price but also any delivery, instalment, set-up and improvement costs. These must be included when checking the $20,000 threshold. For example, if you buy a $19,000 machine and pay $500 to have it installed, the total cost is $19,500 – still under the cap.

GST and Calculating the Cost

When applying the $20,000 cap, you must consider only the portion of the cost net of GST that your business can claim. In practice:

• GST-registered (full credit): If your business is registered for GST and can claim the full GST credit, you exclude the GST portion when measuring the asset’s cost against the threshold. For example, a machine costing $18,000 + $1,800 GST would count as an $18,000 asset for the write-off test. You could claim the full $18,000 (the business portion) as an immediate deduction.
• GST-registered (partial credit): If you are registered but can only claim part of the GST (for example, because the asset is used partly for input-taxed activities), you must exclude only the claimable portion. In effect, reduce the asset’s cost by the GST credit you will receive, then compare to $20,000.
• Not registered for GST: If your business is not registered for GST, or if you cannot claim any GST on the purchase, then include the GST in the asset’s cost. In this case, the threshold is effectively $20,000 including GST. For example, a $20,000 asset plus $2,000 GST (total $22,000) would not qualify, because the full price exceeds $20,000.

Always check invoices carefully: only the portion of GST that your business can claim is excluded from the base cost for the threshold.

Timing – Use or Instalment

To be eligible, the asset must be first used or installed ready for use in the period 1 July 2024 to 30 June 2025. This means:

• If you buy an asset late in June 2025 and install it immediately, it qualifies.
• If the asset is not ready to use until after 30 June 2025 (for example, delivery delayed until July), it would miss the 2024–25 year and only qualify in the next year (assuming the rules are still in effect).
• You can buy or begin preparing the asset earlier (say, June 2024), but the instant write-off only applies if it’s actually put to business use (installed) from 1 July 2024 onward.

This requirement is often described as “first used or installed ready for use for a taxable purpose”. If an asset enters service in that window and meets all other conditions, you can write off its cost immediately.

Key Rules at a Glance

• Turnover under $10 million: Must be a small business (total turnover under $10 million).
• Asset cost: Under $20,000 (i.e. $19,999.99 or less).
• Use period: First used/installed between 1 July 2024 and 30 June 2025.
• Business use: Only the business-use portion of the cost can be claimed. Keep records of usage and receipts.
• GST: Exclude the GST your business can claim when checking the $20,000 cap.
• Multiple assets: You can claim the write-off for multiple assets, as long as each asset individually meets the criteria.
• Keep records: Document all purchases, instalment dates, and business-use percentages as evidence for deductions.

Exclusions and Exceptions

Not every purchase counts as a “depreciating asset” under these rules. Some items are excluded from the simplified depreciation system entirely. Examples of assets not eligible for the instant write-off include:

• Capital works or building upgrades: Structural improvements, extensions, or other construction costs cannot be written off here. They fall under capital works rules.
• Horticultural plants: Items like grapevines or ornamental plants used in farming.
• Leased assets: Assets that are leased out more than 50% of the time (depreciating asset leases) do not qualify here.
• Software development pool: Software that has been allocated to a special software development pool (if you’re using one) is excluded.
• R&D assets: Assets used primarily for research and development activities.
• Low-value pooling exceptions: If you’ve already placed an asset in a low-value asset pool before switching to the simplified rules, it’s not immediately deductible under instant write-off.

In practice, the most common business purchases (tools, equipment, computers, furniture, etc.) are eligible as long as they meet the cost and use tests.

Assets at $20,000 or More

If an asset’s cost (after any GST adjustments) is $20,000 or more, you cannot instantly write it off under this rule. Instead, such assets go into the small business depreciation pool. In that pool you depreciate them over time (generally 15% in the first year, 30% each year after).

• For example, a $25,000 machine would be added to the pool, not immediately deducted.
• However, any remaining balance in the small business pool below $20,000 at 30 June 2025 can be written off entirely (that’s a separate rule).

Summary – Claiming the Write-Off

To use the 2024–25 instant write-off:

• Confirm your business’s turnover is under $10 million (including related entities).
• Buy (or have installed) a depreciating asset during 2024–25 that costs less than $20,000 (net of claimable GST).
• Use the asset in your business (or install it) before 30 June 2025.
• Keep all receipts/invoices and note any business-use percentage.
• When lodging tax, simply deduct the full business portion of that cost in your 2024–25 return under simplified depreciation rules.

By following these rules, you can maximise your tax deductions for small equipment and assets this year. For more details and examples, visit the ATO website or consult a registered tax professional.

Disclaimer: The information provided in this article is intended for general informational purposes only and should not be relied upon as legal, financial or any other type of professional advice. The content presented here is not tailored to individual circumstances, and therefore, readers should not act upon this information without seeking appropriate professional guidance specific to their unique situation. The author and publisher of this article disclaim any liability or responsibility for any loss or damage that may arise from reliance on information contained in this article.