The 2026-27 Budget ended the cycle of annual extensions — here's what permanent means for your small business.
Small business owners have spent the past few years not knowing whether the $20,000 instant asset write-off would survive from one financial year to the next. The 2026-27 Federal Budget settled that uncertainty: according to the Government's tax reform page, the write-off will be permanently extended from 1 July 2026. If the legislation passes, businesses will no longer need to time purchases around annual renewal deadlines.
Under normal depreciation rules, the cost of a business asset is deducted over several years — the effective life of the asset as determined by the ATO. The instant asset write-off short-circuits that process, letting eligible small businesses claim the full cost in the income year the asset is first used or installed ready for use. The tax saving is exactly the same over the asset's full life, but the write-off brings the deduction forward, improving cash flow in the year of purchase.
For a business paying the 25% small company tax rate, a $15,000 asset purchase immediately reduces this year's tax bill by $3,750. Under normal depreciation, that same $3,750 deduction would trickle through at 15% in year one and 30% in subsequent years.
The measure applies to businesses with aggregated annual turnover under $10 million. "Aggregated turnover" includes the turnover of the business plus the turnover of any connected entities or affiliates, so businesses that are part of a larger group need to check carefully. The ATO's instant asset write-off page sets out the full eligibility rules.
| Aggregated annual turnover | Can use instant write-off? | Per-asset limit |
|---|---|---|
| Under $10 million | Yes (subject to legislation passing) | Under $20,000 per asset |
| $10 million or more | No | N/A — normal depreciation applies |
Almost any depreciating asset used for business purposes qualifies, provided it costs less than $20,000 and is first used or installed ready for use in the relevant income year. Common examples include equipment, tools, vehicles (subject to car cost limits), computers, and fit-out items. The $20,000 threshold is based on the GST-exclusive cost if your business is registered for GST, or the GST-inclusive cost if it is not.
Assets that are not eligible include trading stock, land, and assets you don't use in Australia. Certain licensed passenger vehicles may have their deduction capped under the car cost limit rules — check the ATO for the current limit if this is relevant to you.
Assets costing $20,000 or more go into the small business depreciation pool. The pool is depreciated at 15% in the first income year (the year the asset is added) and 30% in each year after that. One helpful feature: if the entire pool balance falls below $20,000 at the end of an income year, the remaining balance can be written off in full at that point.
The permanent extension was announced in the Budget on 12 May 2026 and confirmed in the Government's published tax reform factsheets. However, a budget announcement is not legislation. The change must be enacted by Parliament before it becomes law. The existing temporary measure — extending the $20,000 threshold through to 30 June 2026 — is already law. For the 2026-27 year onwards, businesses should watch for the enabling legislation to pass and check the ATO website for confirmation before relying on the permanent extension. The Budget estimated the measure will improve cash flow for small businesses by around $890 million over five years.
Disclaimer: This article summarises the Budget 2026-27 announcement regarding the instant asset write-off. The permanent extension is not yet law — always confirm current legislation with the ATO's instant asset write-off page before making purchasing decisions, and consult a qualified tax professional for advice specific to your business.