An instant asset write-off is an Australian government initiative that lets eligible businesses claim an immediate deduction for the cost of certain assets. Instead of depreciating the asset over several years, you can write off the entire expense in the same financial year.
If you’re running a small business in Australia, this could seriously benefit your bottom line. So, what does that mean in practice? More control over your cash flow. Less tax payable upfront. And the chance to reinvest sooner in the gear and equipment that keep your business growing.
Now, just to be clear: Payroller doesn’t provide instant asset write-off services. But we know how important it is to stay on top of your obligations and avoid compliance headaches. So we’ve pulled this together to help you get a solid understanding of how to make the most of it. That way, you can stay focused on what you do best and leave the payroll side of things to us.
What is the $20,000 instant asset write-off scheme?
The $20,000 instant asset write-off scheme applies to assets purchased and first used or installed ready for use between 1 July 2023 and 30 June 2024, and the proposed measure intends to extend access until 30 June 2026.
The write-off threshold would have returned to just $1,000 without this extension. That wouldn’t stretch far for most business gear, whether it’s a new laptop for the office or a commercial fridge for your café.
The Australian Chamber of Commerce and Industry (ACCI) has commented that while the extension is positive, the measure still falls short of providing the certainty and support needed for small businesses to confidently invest in assets.
Who qualifies for the instant asset write-off in Australia?
Small businesses with less than $10 million turnover are generally eligible for the scheme. To claim the instant asset write-off, your business must meet the aggregated turnover threshold for the relevant financial year.
Aggregated turnover includes income from your business and businesses connected with you (including affiliates). If your turnover is under the set limit, you’re in. If it’s over, the write-off doesn’t apply.
Learn more from the ATO website.
Do sole traders, partnerships, and companies qualify?
Yes, your business structure doesn’t limit your eligibility, as long as you meet the turnover requirements. Whether you’re a sole trader running an online store or a partnership managing a local cafe, you’ve still got access to the same write-off.
What are the requirements to claim an instant asset write-off?
The asset itself needs to be used (or ready to use) in your business. Here’s what small business owners need to keep in mind:
- You must be running a business, not just holding an ABN for side projects or hobbies.
- The asset needs to be purchased, installed, and ready to use within the dates specified by the ATO for that financial year.
- You need to be using simplified depreciation rules for your tax return.
- Assets can be new or second-hand, as long as they meet the cost threshold for the relevant year.
Understanding your eligibility for the instant asset write-off means you can plan your purchases smartly and save big come tax time.
What types of assets can you claim under the instant asset write-off?
Here’s a no-fuss list of some real examples I often see our Payroller customers claim when they’re setting themselves up for growth or streamlining operations:
- Vehicles: Think delivery vans, utes, and even electric vehicles used for business. Just remember the car cost limit caps how much you can claim (for FY23–24, it’s $68,108 for passenger vehicles).
- Office equipment: Laptops, monitors, printers, coffee machines for the team, or whatever keeps the workplace humming.
- IT hardware: POS systems, servers, networking gear, tablets, especially handy in retail, hospitality, and trade businesses.
- Tools, machinery and equipment: Drills, pressers, welders, commercial kitchen gear, cleaning equipment and more.
These assets can be brand new or second-hand, as long as they’re being used purely or mostly for business purposes. That’s a game-changer for tradies, creatives, and sole traders who want to stay under budget by buying reliable second-hand gear.
Do second-hand assets qualify for write-offs?
Yes. Unlike some other tax perks, the instant asset write-off lets you claim the value of second-hand items too. Pre-owned trucks, refurbished computers, or used workshop equipment are all fair game.
If the asset ticks all the other boxes like date of purchase and use, and fits within the threshold for that financial year, you’re in the clear. This flexibility helps small businesses save big while upgrading gear still in excellent working condition.
What about software, leases, and intangible assets?
Unlike physical equipment, not all intangible assets are claimable under the instant asset write-off.
- Software: Off-the-shelf programs (like your usual accounting or project management tools) often qualify. However, custom-built or internally developed software usually doesn’t.
- Cloud-based subscriptions: Monthly or yearly payments for cloud software like Payroller or Bookipi aren’t considered assets but operating expenses. That said, they may still be deductible, just under a different tax rule.
- Leased items: Write-off might apply if you’re leasing gear under a hire-purchase agreement (and you actually own the asset at the end). Rentals or operational leases are a no-go for this write-off.
Before you make any purchases, double-check eligibility and asset type so your spending will pay off at tax time.
How do you claim the instant asset write-off on your tax return?
Step 1: Check that you meet the eligibility criteria
Your business needs to have had an aggregated turnover under the threshold for the relevant year and be using the simplified depreciation rules.
Step 2: Make sure your timing is correct
The asset must have been used or installed ready for use in the tax year you’re claiming it.
Step 3: Log the asset correctly in your records
You’ll need to know the purchase date, cost (including GST if you’re not registered), and when it was first used.
Step 4: Enter the deduction under the correct labels
If you’re a sole trader or partnership using the business and professional items schedule, record it under the label ‘P8 — Depreciation expenses’ on your individual tax return. Companies record this in the company tax return. Use label ‘Item 6 — Calculation of total profit or loss’, under the depreciation expenses field.
Step 5: Keep all receipts and records
You’ll want to hang onto more than just the invoice. The ATO expects clear, accurate, and complete records that show:
- Tax invoices and receipts: Include the supplier’s details, item description, date of purchase, and full cost of the asset (including GST if you’re registered).
- Finance agreements: If the asset was bought using finance, keep copies of contracts or loan documents showing the total asset cost and setup date.
- Proof of use: Records showing the asset is used in your business. This could be as simple as a dated delivery receipt or usage log.
- Depreciation schedules: If the write-off wasn’t applied in full during that tax year, these come in handy.
- Relevant journal entries: For businesses using cloud accounting software, make sure journal entries match what’s submitted in your tax return.
Make the most of the instant asset write-off before the year ends
Instant asset write-off Australia rules offer a real chance to cut your tax bill and boost your cash flow before the end of the financial year on 30 June. The best part? Small changes in how and when you buy assets for your business can deliver seriously fast returns when it’s tax time.
Here’s where to start:
- Review your business wishlist. Do you need a new laptop, vehicle or tools? Make a list of what could help you work smarter before 30 June.
- Check purchase dates and delivery windows. To claim the instant asset write-off this financial year, the asset must be installed and ready for use by 30 June.
- Talk to your accountant ASAP. This isn’t something you want to play a guessing game on. A short conversation could mean thousands in deductions.
- Record every detail. Asset invoices, receipts, and proof-of-use matters. Make sure they’re on file and labelled clearly for tax time.
Don’t wait until June 29 to scramble. A little action now can put more money back into your business later. And who doesn’t love a legit tax-time win?
