A Guide to the Instant Asset Write-Off

The instant asset write-off is an Australian tax deduction scheme that allows eligible businesses to claim an immediate deduction for the total cost of qualifying assets.

Unlike traditional tax deductions, where businesses depreciate the asset value over several years, this scheme enables businesses to declare the entire amount in the same financial year the asset is purchased or installed.

As a practical example, if your business purchases an eligible asset for $18,000, you can deduct the full $18,000 from your taxable income in the current financial year, reducing your overall tax liability and potentially saving thousands of dollars.

Key points to remember:

• The asset must be used for business purposes.
• There are specific thresholds and eligibility criteria.
• Both new and second-hand assets may qualify.
• Multiple assets can be claimed, provided each is below the threshold.
• Businesses have the option to spread tax breaks over time if preferable.

To claim an immediate deduction for an asset using the instant asset write-off, you must meet the following criteria:

• Aggregated turnover – The business must have an aggregated turnover of less than $10 million in financial year 2024-2025. This includes the annual turnover of your business as well as that of any affiliated or connected business entities.
• Purchase date – The asset must be purchased within the relevant financial year.
• Usage date – The asset must be first used or installed and ready for use within the relevant financial year.
• Cost threshold – The cost of the asset must be less than the specified $20,000 threshold.

Various business structures under Australian law are eligible, including:

• Sole traders – Individuals running their own business can deduct the cost of eligible assets immediately to reduce taxable income.
• Partnerships – Partners in a business can jointly invest in assets and receive immediate tax benefits, lowering each partner’s tax burden.
• Companies – As separate legal entities, companies can reduce their corporate tax liabilities by claiming instant asset write-offs.
• Trusts – Trusts can invest in business assets and claim immediate deductions, optimizing the tax liabilities of beneficiaries.

Tip: For the latest policies, view the Australian Taxation Office (ATO) guidelines.

The instant asset write-off can be used for:

• Multiple assets if the cost of each individual asset is less than the relevant threshold.
• New and second-hand assets.

Most business assets under the cost threshold are eligible, including:

• Vehicles (subject to limits)
• Office furniture and equipment
• Tools and machinery
• Computer hardware
• Point of sale systems
• Solar panels

* This information does not constitute taxation advice and does not take into account your own individual financial circumstances. Please refer to your Accountant for taxation advice and information around whether you may qualify for the Instant Tax Write off.