The $20,000 Instant Asset Write Off Extension—How Small Businesses Can Maximise Claims Before June 2026
The landscape of small business taxation in Australia is constantly evolving, and the end of the financial year often brings uncertainty. As we navigate the 2025–2026 financial year, the Instant Asset Write Off (IAWO) has been a significant point of discussion, creating both anxiety and opportunity for Melbourne entrepreneurs.
We understand that you have heard conflicting information: was the threshold $1,000 or $20,000?
Here is the essential clarity: thanks to recent government action, the higher $20,000 Instant Asset Write Off has been extended. This is a critical development for cash flow and tax strategy, allowing eligible businesses to immediately deduct the full cost of assets up to $20,000 each, rather than the much lower legislated $1,000 limit.
For years, the instant asset write off has been a cornerstone of government support for small and medium sized enterprises (SMEs), encouraging investment and stimulating economic activity. The extension of the $20,000 limit provides a substantial window of opportunity for your Melbourne business to invest in much needed equipment, technology, and vehicles. Understanding the latest rules, and leveraging them effectively, is paramount for optimising your business’s financial position.
Let us explore the details of the extended $20,000 instant asset write off, who is eligible, what you can claim, and crucially, how your Melbourne business can strategically utilise this provision before the 30 June 2026 deadline.
Important Tax Disclaimer (October 2025)
The $20,000 Instant Asset Write Off extension to 30 June 2026 is based on a Bill currently progressing through the Commonwealth Parliament (Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Bill 2025). While this extension has overwhelming support and is anticipated to become law shortly, businesses should ensure they consult with their accountant to confirm the Bill has received Royal Assent before committing to large asset purchases based solely on this announcement.
What Exactly is the $20,000 Instant Asset Write Off Extension?
Effective for assets first used or installed ready for use between 1 July 2025 and 30 June 2026, eligible businesses can immediately deduct the full cost of eligible depreciating assets costing less than $20,000 (excluding GST for GST registered entities).
This is a powerful distinction: instead of deducting the cost over several years through the standard depreciation process (which often takes five to ten years), you can claim the entire amount as a deduction in the financial year the asset is first used or installed.
Why the Confusion? The $1,000 vs $20,000: The previous temporary $20,000 threshold was due to revert to the permanent, long term legislated $1,000 limit from 1 July 2025. The extension means the Government has effectively bypassed this reversion, maintaining the higher limit to continue supporting small business investment. This immediate deduction is a critical cash flow advantage, allowing you to reduce your taxable income now.
Who is Eligible for the $20,000 Instant Asset Write Off?
The eligibility criteria are targeted towards smaller businesses:
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Business Turnover: Your business must be a small business entity with an aggregated annual turnover of less than $10 million. This includes the turnover of your business and any entities connected to you or your affiliates. This threshold encompasses the vast majority of small and medium enterprises across Melbourne.
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Asset Purchase Date: The eligible depreciating asset must be first held, and first used or installed ready for use, between 1 July 2025 and 30 June 2026. This “ready for use” date is the most critical compliance factor.
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Cost Threshold: The cost of the eligible depreciating asset must be less than $20,000 per individual asset.
It is worth noting that for assets costing $20,000 or more, or for businesses with an aggregated turnover of $10 million or more, the normal depreciation rules will apply. For small businesses, this typically means placing the asset in the simplified depreciation pool (depreciated at 15% in the first year and 30% in subsequent years).
What Assets Can Your Melbourne Business Claim?
The scope of eligible assets is broad, covering most tangible depreciating assets used in your business. With the $20,000 limit, you can claim significant items that directly enhance your business operations, efficiency, and safety.
Here are some common examples relevant to Melbourne’s diverse business landscape:
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Vehicles and Transport: Small commercial vehicles, utes, vans, trailers, or accessories for existing work vehicles, provided the total cost of the vehicle is less than $20,000 (subject to the separate car limit if a passenger vehicle).
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Manufacturing and Trades: Welding equipment, compressors, workshop tools, bench saws, 3D printers, or specialised machinery components. This is a huge win for Melbourne’s trades and light industrial sectors.
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Retail and Hospitality: Commercial ovens, dishwashers, high end espresso machines, upgraded point of sale (POS) hardware, advanced security and CCTV systems, or new refrigeration units.
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Technology and Office: Complete office fitouts, servers, high performance computer workstations for graphic design or video editing, high capacity printers and scanners, or cloud integrated telecommunications systems.
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Fitness and Health: New gym equipment, specialised physiotherapy or massage tables, diagnostic equipment, or upgraded clinic furniture.
Remember: The $20,000 applies per asset. This means a cafe owner could purchase a $19,000 coffee machine and a $15,000 display fridge, claiming a total deduction of $34,000 in one year.
What you generally cannot claim:
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Buildings and structural improvements: These are not considered depreciating assets.
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Assets leased out to other entities: Unless your business is primarily in the business of leasing.
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Trading Stock or Inventory: These items are accounted for separately under Cost of Goods Sold.
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Assets used primarily for Research and Development (R&D): These are typically claimed under the R&D tax incentive.
Strategic Planning: Maximising the $20,000 Threshold
The extended write off is a valuable planning tool, but it requires strategic thinking to maximise the tax benefit. Here is how your Melbourne business should approach its capital expenditure:
1. Prioritise Needed Upgrades
Do not buy assets solely for the tax deduction. However, if you have deferred purchasing essential, efficiency boosting equipment (like that new air conditioning unit for your office or a replacement commercial mixer for your bakery), now is the time to act. This is the most straightforward way to reduce your 2026 tax bill while genuinely improving your business.
2. The Critical “Ready For Use” Date
For Melbourne businesses that purchase imported machinery or complex equipment, the date the asset is first used or installed ready for use is paramount. Merely paying for the asset before 30 June 2026 is insufficient. You must ensure installation and commissioning are complete. Supply chain delays are common—plan your purchases to allow a buffer, ideally finalising installation by early June 2026.
3. Managing Assets Just Over the Threshold
If an asset costs $20,000 or more, it must be depreciated using the small business pool. Strategically, if you are looking at an item that costs $20,500, a small discount negotiation or considering a slightly lower specced model to get the cost under $20,000 could instantly save you the difference between an immediate 100% deduction and a first year deduction of only 15% (which is only $3,075).
4. Clearing the Depreciation Pool Balance
If your business has been using the simplified depreciation rules, any remaining balance in your small business general pool at the end of the 2025–2026 financial year can be immediately deducted if the balance is less than $20,000. This is a powerful, often overlooked, year end tool to fully write off legacy assets.
5. Meticulous Record Keeping
The ATO is acutely aware of the temptation to overclaim during these incentive periods. Meticulous record keeping is non negotiable. For every asset you claim, you must retain:
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The Original Tax Invoice: Clearly showing the purchase date and cost (excluding GST if registered).
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Evidence of Payment: Bank statements or loan agreements.
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Proof of Installation/Use: Documentation showing the asset was physically placed into service by 30 June 2026 (e.g., installation receipts, logbook entries, or signed delivery dockets).
A robust digital accounting system (like Xero or QuickBooks) with integrated receipt capture can simplify this process immensely.
Beyond the Write Off: A Holistic Tax Strategy for Melbourne Businesses
The Instant Asset Write Off is an accelerator, but it is one piece of the puzzle. For Melbourne businesses aiming for sustained growth and compliance, a broader approach is essential.
1. Managing Victorian State Taxes
As a Melbourne business, you face specific state based compliance. Our experts provide ongoing advice on the intricacies of Victorian Payroll Tax (especially important as your business scales) and the latest changes to Land Tax for property investors and developers. Tax planning must look beyond the Federal level.
2. Superannuation Strategy
The increase of the Superannuation Guarantee (SG) rate to 12% from 1 July 2025 is mandatory. Ensure your payroll system is correctly configured and, more importantly, consider personal tax deductible super contributions (Concessional Contributions) to reduce your taxable income while boosting your retirement savings.
3. Prepayment Strategies
Beyond assets, other end of financial year strategies should be employed. If your cash flow allows, consider prepaying expenses for the next 12 months, such as:
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Business Insurance Premiums: Often a large, annual expense.
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Interest on Business Loans: Prepaying up to 12 months of interest.
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Subscriptions and Memberships: Prepaying for software or industry body fees.
These prepayments allow you to bring forward deductions into the current 2025–2026 tax year.
Why Your Accountant is Your Most Valuable Asset This Year
The difference between the legislated $1,000 limit and the anticipated $20,000 limit underscores the need for expert advice that is current to the day. The complexity involved in timing, eligibility, and documentation means that relying on generalised online advice could be costly.
A qualified Melbourne accountant does more than just prepare your tax return; they act as your strategic financial partner. We help you:
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Navigate Legislative Uncertainty: We provide you with real time confirmation that the $20,000 Bill has passed and is law, allowing you to confidently proceed with major purchases.
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Optimise Your Purchases: We advise on the perfect timing and structuring of asset purchases to ensure you meet the $20,000 per asset rule and the critical “ready for use” deadline.
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Integrate Compliance: We ensure the IAWO is integrated with your payroll obligations (STP Phase 3), FBT compliance, and state tax requirements.
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Holistic Tax Planning: We look at your business structure, growth plans, and personal wealth to ensure your tax strategy is sustainable, not just a one off tax cut.
Conclusion: Do Not Delay Your Investment Decisions
The extension of the $20,000 Instant Asset Write Off to 30 June 2026 is a significant opportunity for Melbourne’s small businesses to upgrade equipment, enhance productivity, and manage their tax liability. The clock is ticking, and proactive planning is essential to ensure your purchases are eligible and installed before the deadline.
Do not let confusion about the $1,000 vs $20,000 limit cause you to miss out. Take action today: review your capital expenditure list, confirm your eligibility, and engage with a trusted accounting partner to secure your $20,000 deductions.
Reach out to our expert team in Melbourne today to discuss how we can help your business strategically leverage the $20,000 instant asset write off and all other tax opportunities available to you.
Disclaimer
This blog post is for general information only. It’s not financial or legal advice. Every business is different, so what’s right for one might not be right for another. You should always get advice specific to your own situation from a qualified professional. We are giving general information only.
Need a Hand with Your Instant Asset Write-off, or Setting up your Accounts?
SEED PLUS is located in Rowville Melbourne, Victoria, and want to talk more about instant asset write-off, which assets to write-off, how to write -off or anything else related to making your business more profitable, then SEED PLUS can help. We’re an experienced Accounting Practice, operating more than 15 years, and we understand the numbers and the rules.
Contact SEED PLUS today! Let’s make your business shine, not just in profits, but in positive impact on the socity, environment and economy too.
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