About the instant asset write-off
Eligible businesses can claim an immediate deduction for the business portion of the cost of an asset in the year the asset is first used or installed ready for use.
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.
For an asset for which you have claimed an immediate deduction under the simplified depreciation rules in a prior income year, small businesses can also immediately deduct an amount included in the second element External Link(cost addition) of that asset's cost, where the amount is:
- the first deductable amount of second element cost incurred after the end of the income year in which the asset was written off
- less than $20,000
- incurred between 1 July 2023 and 30 June 2024
If you are a small business, you need to apply the simplified depreciation rulesExternal Link to claim the instant asset write-off. It cannot be used for assets that are excludedExternal Link from those rules.
The instant asset write-off eligibility criteria and threshold have changed over time. You need to check your business's eligibility and apply the relevant threshold amount. The income year in which you may claim an instant asset write-off depends on when the asset was purchased, first used or installed ready for use.
Example 1: purchase of assets and cost additions under the relevant threshold
Jack is a sole trader with an aggregated turnover of less than $10 million and uses the simplified depreciation rules. He purchased an excavator for $220,000 for his business and first used it on 20 January 2021. He claimed the cost of the excavator under temporary full expensing in his 2020–21 income year tax return.
On 15 August 2023 Jack purchased, and installed ready for use, a new bucket for his excavator which cost $19,000. He did not have any previous cost additions for the excavator. As the bucket is the first addition to the second element of cost for the asset which Jack had written off in an earlier income year, he is able to claim a deduction for its full cost in his 2023–24 income year tax return as it is under the relevant threshold of $20,000.
Jack also purchased a new MIG welder for $4,500 which was delivered ready for use on 12 May 2024. As the cost of the MIG welder was under the relevant threshold and he only uses it for his business, he can instantly write off its full cost as a deduction in his 2023–24 income year tax return.
End of example
Eligibility
Eligibility, and the year in which you may use the instant asset write-off to claim an immediate deduction for an asset depends on:
- your aggregated turnover (the annual turnoverExternal Link of your business and that of any business entities that are your affiliates or connected with you)
- the date you purchased the asset
- when it was first used or installed ready for use
- the cost of the asset being less than the threshold.
Thresholds
The thresholds have changed over recent years.
|
Eligible businesses |
Date range for when asset first used or installed ready for use |
Threshold |
|---|---|---|
|
Less than $10 million aggregated turnover |
1 July 2023 to 30 June 2024 |
$20,000 |
|
Less than $10 million aggregated turnover |
12 March 2020 to 30 June 2021, providing the asset was purchased on or after 7:30pm (AEST) on 12 May 2015 and by 31 December 2020 |
$150,000 |
|
Less than $10 million aggregated turnover |
7:30pm (AEDT) on 2 April 2019 to 11 March 2020 |
$30,000 |
|
Less than $10 million aggregated turnover |
29 January 2019 to prior to 7:30pm (AEDT) on 2 April 2019 |
$25,000 |
|
Less than $10 million aggregated turnover |
1 July 2016 to 28 January 2019 |
$20,000 |
Note: (12 March 2020 to 30 June 2021) Instant Asset Write -off was suspended from 1 July 2021 to 30 June 2023, while Temporary Full Expensing was available.
|
Eligible businesses |
Date range for when asset first used or installed ready for use |
Threshold |
|---|---|---|
|
Less than $500 million aggregated turnover |
12 March 2020 to 30 June 2021 providing the asset was purchased on or after 7:30pm (AEST) on 2 April 2019 and by 31 December 2020 |
$150,000 |
|
Less than $50 million aggregated turnover |
7:30pm (AEDT) on 2 April 2019 to 11 March 2020 |
$30,000 |
Make sure you have checked the eligibility criteria for your business.
Exclusions and limits
A car limit applies to the cost of passenger vehicles.
There are also a small number of assets that are excludedExternal Link.
Car limit
A car limit applies to the cost of passenger vehicles (except a motorcycle or similar vehicle) designed to carry a load less than one tonne and fewer than 9 passengers.
The one tonne capacity is the maximum load your vehicle can carry, also known as the payload capacity.
The payload capacity is the gross vehicle mass (GVM) as specified on the compliance plate by the manufacturer, reduced by the basic kerb weight of the vehicle.
The basic kerb weight is the weight of the vehicle with a full tank of fuel, oil and coolant together with spare wheel, tools (including jack) and factory-installed options. It doesn't include the weight of passengers, goods or accessories.
Payload capacity = GVM – basic kerb weight
The car limit does not apply to vehicles modified for use by people with disability.
You can't claim the excess cost over the car limit under any other depreciation rules.
Where the instant asset write-off threshold is higher than the car limit for the relevant income year, it will be limited to the business portion of that car limit.
Example 2: purchase of a motor vehicle for business purposes – the effect of the car limit for depreciation
Edward and Edna own and run a small irrigation supplies business and they use the simplified depreciation rules. On 15 December 2020 the business purchased a car designed to carry passengers for $80,000 (including GST). The car was delivered and ready for business use on 5 May 2021. The car was used 75% of the time for business purposes.
As such, the maximum amount Edwards and Edna can claim under instant asset write off is $44,352 (75% of $59,136 car limit for 2020–21 income year).
Edward & Edna can't claim the balance of cost of the car ($35,648) under any other depreciation rules.
End of exampleIf your vehicle is not considered a passenger vehicle, the car limit doesn't apply to that vehicle. You can claim the cost of the vehicle if it is less than the relevant threshold amount.
How GST applies
If your business is registered for GST and can claim the full GST credit, you exclude the GST amount you paid on the asset when calculating car depreciation amounts. If you are only able to claim a portion of the GST credit, then the cost is reduced by the portion you can claim.
For example, if a business is registered for GST and the vehicle cost is $60,000 GST inclusive, the maximum GST credit that can be claimed is 1/11th of the car limit ($5,376 for 2020–21 income year). The balance ($60,000 - $5,376= $ 54,624) is less than the car limit of $59,136 for the 2020–21 income year, so the business can claim a maximum depreciation amount of $54,624 in that income year.
If your business is not registered for GST, you include the GST amount you paid on the asset in car depreciation calculations. For example, if a business is not registered for GST and purchased a vehicle costing $60,000 GST inclusive, the maximum depreciation deduction that can be claimed is the car limit of $59,136.
Cost of asset exceeds threshold
If you are a small business, you must use the simplified depreciation rulesExternal Link to claim the instant asset write-off. If you use the simplified depreciation rules and the cost of the asset is the same as or more than the relevant instant asset write-off threshold, the asset must be placed into the small business poolExternal Link.
Example 3: exceeding the threshold
Daryl owns a small electrical business, Daryl’s Electrical, which has an aggregated turnover less than $10 million. On 28 July 2023, Daryl purchases a Ute for $40,000. He estimates he will use the Ute 40% of the time for his business.
Even though the cost of the Ute to the business is $16,000 ($40,000 × 40%), Daryl can't use the instant asset write-off as the total cost of the Ute of $40,000 exceeded the relevant threshold of $20,000.
Instead, he adds the $16,000 business portion of the Ute's cost to Daryl’s Electrical small business pool.
End of example
Work out your deduction
The entire cost of the asset must be less than the relevant threshold, not including any trade-in amount. Whether the threshold is GST exclusive or inclusive depends on if you're registered for GST.
To work out the amount you can claim, you must subtract any private use portion. The balance (that is the portion you use to earn assessable income) is generally the taxable purpose portion (business purpose portion). While you can only claim the taxable purpose portion as a deduction, the entire cost of the asset must be less than the relevant threshold.
Example 4: business and personal use of asset
On 18 November 2023, Fiona buys a new computer for $6,800 that she uses 80% of the time for her business as a sole trader. She also bought a new printer for $700 that she uses for 100% of the time for business purposes.
For the computer, Fiona calculates the business use portion that she can claim a deduction for under the instant asset write-off as $5,440 (80% of $6,800). For the printer, she can claim the entire cost of $700.
Fiona includes the combined amount of $6,140 in her tax return.
End of exampleResearch and development
This also applies to research and development (R&D) use. When you work out the R&D tax offsetExternal Link amount for your R&D use you must subtract any non-R&D use including the taxable purpose portion and private use portion.
If you are a small business and you have used your asset for R&D activities, you may not be able to claim the instant asset write-off for that asset and the normal depreciation rules will apply.
For more information, see:
Damaged or destroyed property – insurance payoutsExternal Link