Instant write-off for small business assets under $20,000: how does it work?

The Liberal government have announced  an instant tax deduction for assets costing up to $20,000. But how does it work?

See the update on this topic following the 2016 Federal Budget.

It looks like “back to a better future” could be the motto of the Liberal government following Budget 2015.

The announcement is a reversal from last year, when they reduced the instant tax deduction for assets costing up to $6000 to a lower limit of $1000.

This also a “limited time offer,” with the instant deduction applying to assets purchased from budget night until June 30, 2017.

In any small business, cash flow is the number one concern. These measures essentially mean that a taxpayer can bring forward deductions where they wouldn’t otherwise have been able to do so.

Any small business with turnover of less than $2,000,000 can purchase assets up to the value of $20,000 and get an immediate tax deduction for them rather than having to write them down over the following years.

In addition, assets valued at $20,000 or more can continue to be placed in the small business simplified depreciation pool (the pool) and depreciated at 15 percent in the first income year and 30 percent thereafter.

The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools).

What is a depreciating asset?

Let’s be clear what type of business assets we are talking about.

A depreciating asset is an asset used in a business that has a limited effective life and is expected to decline in value over the period you use it.

Vehicles, office furniture and equipment are depreciating assets. Land, computer software, items of trading stock and certain intangible assets (goodwill) are not depreciating assets.

What qualifies? What can I buy?

Here are a few ideas:

  • IT hardware such as desktop computers, printers, scanners and photocopiers, but not in-house software where the firm intends claim under the software development pool rules*
  • Office or shop furniture and fittings, such as new tables for a cafe
  • Display screens, kitchen equipment, signage and air conditioners
  • Work vehicles, such as a $19,999 Ute. Just wait for the EOFY advertisements!
  • Tradesmen’s tools and machinery
  • Plant and equipment
  • Sheds or storage containers for storing equipment.

Tips and traps


  • This tax concession is ideal for those businesses that were planning to purchase assets anyway or have a real business need to update equipment. If it can improve your bottom line (net profit) then look at taking advantage of the opportunity.
  • If you purchase before 30 June 2015, you will get 30 cents back in tax. Purchase after 1 July 2015 and before 30 June 2017 and you will get 28.5 cents back.
  • The reality of the ability to pool assets costing more than $20,000 will be that small businesses must purchase assets before June 30, 2015 to ensure that a deduction can be claimed for the written down value in the 2017 financial year.
  • The devil will be in the detail, but the instant write off for an asset pool with a value of less than $20,000 would appear to also apply to existing asset pools. This could mean businesses with existing asset pools can claim a full tax deduction for that pool for the 2015 financial year if its written down value is less than $20,000.


  • This is not a grant or allowance, and you should not rush out to buy any asset before checking with your accountant. If your business is not making a profit, then a tax deduction is of no use to you.
  • If your business is expected to make profit next year or the year after, then you may better off waiting to use the deduction in those tax years.
  • Don’t take on unnecessary debt just chasing a tax deduction. Interest rates are at 40-year lows but will not stay here long term.
  • Don’t be tempted to bend the rules in order to claim the deduction, as the Australian Taxation Office will be watching closely and will no doubt devote compliance resources to scrutinising these claims.
  • Beware of the definition of “small business,” especially if you are part of a group of companies. In order to qualify for these concessions, businesses must align with the Australian Taxation Office (ATO) definition of a small business, which is an individual, partnership, trust or company with an aggregated turnover of less than two million dollars. An aggregated turnover is the annual turnover of any business that an individual is connected or associated with.

If used wisely, the instant deduction can be a real benefit to profitable small businesses that were planning on purchasing assets anyway. Talk to your accountant to be sure.

The changes in the Federal Budget will affect every business on 1 July. Subscribing or upgrading your MYOB software will ensure your business is always compliant with tax changes, including the government’s new SuperStream system for paying super contributions.

*Editors Note 17 June: ‘not software’ corrected to ‘not in-house software where the firm intends claim under the software development pool rules’.

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  • Great article, especially the tips. In an ever changing world of finance, blogs like this are rare nuggets of truth. Keep them coming :)

  • Thanks for the tips. wow for only $20,000 you can be big time :)

    • Sam

      Our business needed to spend money earlier in this financial year does this mean that the immediate deductibility for assets under $20,000 does not apply to these purchases? ie: is the purchase window only from the date of the announcement to June 30?

      • The write off only applies to Businesses with an annual turnover under $2 million and they can claim immediate tax deductions for as many sub-$20,000 purchases as they make between 7:30pm on budget night and June 30, 2017. So items purchased before that date do not apply.

    • Khoi Nguyen

      One question, does this also applies to second-hand equipment?

      • Yes it applies to secondhand equipment too.

  • The competition for the #SmallBusiness dollar starts! @HarveyNormanAU fires the first volley!

  • Sam

    Our business needed to spend money earlier in this financial year does this mean that the immediate deductibility for assets under $20,000 does not apply to these purchases? ie: is the purchase window only from the date of the announcement to June 30?

  • Is the $2Million turnover before or after GST?

    • You are a small business if you carry on a business and your business turnover (aggregated turnover) is less than $2 million.
      Your turnover includes all income earned in the ordinary course of business for the income year. Turnover refers to your gross income or proceeds, rather than your net profit. It doesn’t include any goods and services tax (GST) amounts you have charged on your sales.

  • Donna Chappelow

    The article above mentions that software is not eligible for the immediate write off, however this excerpt is direct from the ATO link from Liam above:


    An eligible small business can claim an immediate deduction for any software purchased off the shelf, costing less than $20,000 that is used exclusively in the business.

    An eligible small business can also claim an immediate deduction for the cost of developing software for use exclusively in its business where the cost is less than $20,000. An exception applies if the entity has previously chosen to claim deductions for in-house software under the software development pool rules. In these cases the costs need to continue to be allocated to that pool.”

    • Donna you are correct. The exclusion is for in-house software where the firm intends claim under the software development pool rules. Thanks for pointing that out. I will see if I can get the article updated.

      • Ardin

        We are about to enter an agreement for the purchase of a custom website $5,500. My head is not 100% around this, but am I correct in saying that as a small business (turnover <$2m) I can claim an instant Tax deduction as long as I don't intend to claim it under the software development pool rules?

  • Andy

    The previous write-off limit was $6,500 not $1,000.
    The reality is buying assets costing more than $20,000 before 30 June 2015 will not allow a full deduction by 30 June 2017 as you get 15% of the asset in year one, then 30% of the declining pool balance each year after that. It can go on forever if you keep buying assets. 30% of a declining pool balance doesn’t mean 30% of the cost of the asset.
    And the disclaimer is that this is not yet law so your acting on a budget announcement if you do act, and while it stands a good chance of getting through the current government have proven nothing if they haven’t proven that they can stuff just about anything up…

    • From the ATO “From 1 January 2014, the threshold will change and only assets costing less than $1,000 (that the entity starts to use or have installed ready for use, after 31 December 2013) will be eligible for immediate write-off. Assets costing $1,000 or more will need to be depreciated in the general small business pool.
      Assets costing less than $6,500, that the small business entity starts to use or have installed ready for use, between 1 July 2013 and 31 December 2013, will still be eligible to be immediately written-off.
      However, the application date for small business entities who use a substituted accounting period may be 1 January 2013. Please see below for further information.
      The changes also modify the rules for writing-off of low pool values. The value of a small business entity’s general small business pool needs to be less than $1,000 at the end of the 2013-14 income year for the small business entity to claim a deduction for the entire value of the pool.”

  • Denis Bourmistrov

    I am confused, how can the government announce something that is FACT or LAW from the moment of announcement, since they can’t get most things through lower or upper house. So if this bill doesn’t pass through parliment, does that mean, anyone who took ‘advantage’ of this >$20,000, will have to pay the full amount?

  • Bernard

    Re: Denis Bourmistrov

    When a proposed law change is announced but not yet enacted, the ATO provides advice to taxpayers about following the existing law and also information about the proposed changes.

    As this law change will be retrospective if enacted, it is important that small businesses understand their obligations under both the existing and proposed laws.

  • Thanks for sharing.

  • Bridget Allan

    Question: If i was to purchase a new car for my business and the actual cost is $24,000, but the dealership gives me a $5,000 trade in so I only pay $19,000 for the new car is this considered an asset purchase for under $20,000 or is it over because the value of the purchase is over $20,000.

    • Moi

      If you purchased a car for $24K and it is 100% business use and you were registered for GST then the purchase costs would be $21,818. When this is added you recieve 15% depreciation deduction and the closing balance of your pool after this may be less than $20K. You may then be able to also claim the balance of the car in the same year as an immediate write-off.

  • January

    To my understanding the trade-in deal of $5000 is a monetary value of your car(given up). Therefore the cost of the new(business) car is $24000(19000+5000). YOUR ACCOUNTANT WILL BE ABLE TO HELP YOU OUT WITH THIS.

  • Ashley

    Would sole traders who contract to the one business (ie PSI applies) be entitled to claim the instant asset write off?

  • Yagga

    I am a bit of a dunce when it comes to tax but I have a question for you all.

    If my taxable income is 200K and I purchase a work vehicle for $19 999 does $19 999 come straight off my taxable income total?

    Does my taxable income become: $180 001??

    Thanks for all of your help in advance!

  • Carlo Aliffi

    I have bought a second hand truck for my business for $20,000 ($18,182+GST) so which is the purchase price that I can write off $20,000 (which it can’t be immediately written off) or $18,182 (which it could be immediately written off)?

  • Rie

    Hi, Just wonder as I got 2 different businesses: one is bakery and the other is hair dressing under 1 ABN. I bought 2 assets in January 2015: One for bakery costs $15000 and the other for Hair Dressing: $17000. Nothing in Opening Balance, so can I qualify for writing off assets under $20000 for each business as its pool for each business on 30/06/15 less than $20000?

    • Steven Wright

      Hi Rie, we’d suggest you talk to your accountant for any specific questions. That said, looking at the article, it states “the instant deduction applying to assets purchased from budget night (May 12, 2015)”, which would indicate a Jan 2015 purchase would not be eligible. Regards, Steve

      • rie

        Thank Steven, as the article said ” The pool can also be immediately deducted if the balance is less than $20,000 over this period (including existing pools)” ? So each business got each pool less than $20K in my case, can write off the assets ?