What’s Happening with the $20,000 Instant Asset Write-Off?
If you’re a small business owner, you’ve probably heard about the $20,000 instant asset write-off. It’s been one of the most popular tax breaks for small businesses since it was introduced, letting you immediately deduct the full cost of equipment, tools, and other assets instead of depreciating them over years.
But the current rules are (or were) set to expire on June 30, 2025. And while there’s been political talk about extending it, the reality is more complicated than the headlines suggest.
After helping thousands of small businesses navigate these write-offs over the years, we know how much they matter for your cash flow and tax planning. Let’s break down what’s actually happening, what you need to know, and what you should do before the deadline hits.
What Exactly Is the $20,000 Instant Asset Write-Off?
The instant asset write-off is pretty straightforward. If your business has an aggregated turnover under $10 million, you can immediately deduct the full cost of eligible assets that cost less than $20,000 each. Instead of claiming depreciation over several years, you get the entire deduction in the year you buy and use the asset.
Here’s how it works:
- Who qualifies: Small businesses with turnover under $10 million
- What counts: New or second-hand depreciating assets under $20,000 each
- When it applies: Assets first used or installed ready for use between July 1, 2024, and June 30, 2025
- Per-asset basis: You can write off multiple assets as long as each one costs under $20,000
Real-world example: If you buy a $15,000 piece of equipment and a $8,000 computer system in the same year, you can immediately deduct the full $23,000 instead of spreading it over multiple years.
The benefits are clear: better cash flow, simpler bookkeeping, and immediate tax relief when you’re investing in your business. It’s designed to encourage small businesses to buy the equipment they need without worrying about complex depreciation schedules. It also encourages investment and a stronger economy, or ‘jobs and growth’, in other words.
The Political Promise vs. Reality Check
This is where things get interesting. During the 2025 federal election campaign, both major parties made big promises about the instant asset write-off:
Labor’s commitment: The Albanese government promised to extend the $20,000 write-off for another year if re-elected.
Coalition’s counter-offer: The opposition pledged to make the write-off permanent with a higher $30,000 threshold, arguing that certainty is what small businesses really need.
Sounds great, right? Here’s the catch: While Labor won the election and technically legislated an extension, the 2025 federal budget didn’t actually allocate funding beyond June 2025 for the scheme. That’s created a gap between the political promises and the budget reality.
What this means in practice: The legislation exists for an extension, but without budget funding, the future remains uncertain.
What We Know for Certain (And What We Don’t)
Definitely happening:
- The current $20,000 instant asset write-off expires on June 30, 2025
- You can still claim it for eligible assets purchased and used before that date
- The extension legislation exists but lacks budget funding
Still uncertain:
- Whether the government will find budget funding for the promised extension
- How long any extension might last. Current promise is 30 June 2026
- Whether the threshold might change (from $20,000 to $30,000 or back to lower amounts)
Our professional perspective: After decades of watching tax policy changes, we’ve learned that political promises don’t always translate to immediate action. Budget constraints, changing priorities, and Senate negotiations can all affect what actually happens.
The reality is that even well-intentioned policies can be delayed or modified when budget time comes around. That’s not criticism of any particular government, it’s just how the system works.
Smart Strategies for the Uncertainty Around the $20,000 Instant Asset Write-Off
Given the unclear future of the instant asset write-off, here’s what we’re advising our small business clients:
If You Need Equipment Now
Act before June 30, 2025: If you’ve been planning equipment purchases, don’t wait. The current write-off is guaranteed until the deadline, but nothing beyond that is certain.
Focus on genuine business needs: Don’t buy equipment just for the tax break. Make sure any purchases align with your actual business requirements and cash flow capacity.
Consider timing: If you’re planning a major purchase, getting it done and “first used” before June 30 ensures you get the write-off under current rules.
If You’re Planning for the Future
Prepare for different scenarios: Budget for equipment purchases assuming the write-off might not be available. If it gets extended, that’s a bonus. If it doesn’t, you’re prepared.
Track the political process: Keep an eye on budget announcements and Senate negotiations. The extension could still happen, but it might come with different terms or timing. You can also keep up to date with the ITP blog, where we share regular updates about tax, to help keep you informed about what’s important.
Consider alternative depreciation strategies: If the instant write-off disappears, you’ll need to plan for traditional depreciation methods. This affects cash flow planning and timing of purchases.
Documentation and Compliance
Keep detailed records: For any assets you’re claiming under the current write-off, maintain thorough documentation showing purchase date, first use date, and business purpose.
Understand the “first use” requirement: The asset must be first used or installed ready for use before June 30, 2025. Simply purchasing before the deadline isn’t enough if you don’t start using it.
Consider professional advice: With the uncertainty around future rules, professional guidance can help you optimise your equipment purchasing strategy.
The Bigger Picture for Small Business
The instant asset write-off debate reflects broader challenges in small business tax policy. Small businesses need certainty to plan investments, but governments face budget constraints and changing economic priorities.
Why extensions keep happening: The write-off has been extended multiple times because it’s popular with small businesses and relatively easy to implement. But each extension creates more uncertainty about long-term planning.
The permanency argument: The Coalition’s push for a permanent write-off addresses the certainty issue, but permanent tax breaks are harder to fund and adjust when economic conditions change.
What small businesses really want: Based on our conversations with clients, most would prefer a lower permanent threshold over a higher temporary one. Knowing you can always write off equipment under $20,000, for example, is more valuable for planning than not knowing if you’ll be able to write off anything next year.
Your Next Steps
Before June 30, 2025:
- Review your equipment needs and planned purchases
- Ensure any assets you buy are “first used” before the deadline
- Keep thorough documentation for any write-off claims
- Consider your cash flow capacity for larger purchases
Looking ahead:
- Stay informed about budget announcements and policy developments
- Plan equipment purchases assuming the write-off might not continue
- Consider how different scenarios would affect your business planning
Get professional advice: Tax policy uncertainty is exactly why professional guidance matters. We can help you navigate the current rules, plan for different scenarios, and ensure you’re maximising available benefits while managing business risks.
The instant asset write-off has been a valuable tool for small businesses, and there’s still time to use it under current rules. While the future remains uncertain, smart planning can help you make the most of available opportunities while preparing for whatever comes next.
For specific advice on how the instant asset write-off applies to your business situation, or help planning your equipment purchases before the deadline, book a consultation with your nearest ITP tax professional.
Disclaimer: This article is for information only and doesn’t constitute financial or tax advice. Tax laws are complex and every business situation is different. For personalised guidance, speak with a qualified tax professional who can analyse your specific circumstances.