Instant Asset Write-off:
Common Questions for Australian Businesses

A tax concession that lets eligible businesses deduct the full cost of an asset in the year it is purchased, rather than gradually over its useful life. It is available when the asset costs less than the relevant threshold and is first used or installed ready for use within the eligibility period. The current threshold is $20,000 per asset for businesses with aggregated turnover under $10 million, applying to assets first used or installed ready for use between 1 July 2023 and 30 June 2026. This threshold has changed many times. Always confirm the current limit with your advisor. For accountants The write-off under section 328-180 applies per asset. Multiple assets each under the threshold can all be written off in the same year. The write-off does not apply to assets acquired through a private arrangement at above-market cost, or to assets that do not meet the taxable purpose test.

Temporary full expensing (TFE) was a pandemic-era tax concession that allowed eligible businesses to deduct the full cost of new and second-hand assets with no dollar cap. It applied from 6 October 2020 to 30 June 2023 and has now ended. If your business purchased assets during that period and claimed TFE, those assets will have a tax written-down value of zero, even if they are still in active use and worth significant money to replace. For accountants TFE was implemented via Subdivisions 40-BB and 40-BC of the ITAA 1997. The ongoing consequences for businesses that claimed under TFE include: zero tax WDV on those assets (meaning any sale proceeds are fully assessable), no tax depreciation deductions remaining, and deferred tax liabilities that continue to unwind. Advisors should review forTFE claims and consider the tax outcomes when planning asset disposals.

It should not, but it often does, and that is one of the most common mistakes in small business accounting. The instant asset write-off reduces the asset's value to zero for tax purposes. For accounting purposes, the asset should still appear on the balance sheet at its cost less accumulated accounting depreciation. The tax outcome and the accounting outcome are different and need to be maintained separately.

Under the current rules, the $20,000 threshold applies to both new and second-hand assets for small businesses. This was not always the case — under temporary full expensing, there were different rules for new versus second-hand assets for larger businesses. Always confirm eligibility with your tax advisor for the specific asset and income year. For accountants Under section 328-180, the write-off applies to assets used or held ready for use — it does not distinguish between new and second-hand for SBEs at the current threshold. However, there are integrity rules that prevent related-party acquisitions at inflated prices from accessing the concession.

You can only claim depreciation, including the instant asset write-off, on the portion of the asset used for business purposes. If you use a vehicle 70% for business and 30% for personal use, you can only claim 70% of the depreciation as a tax deduction. This proportion is called the taxable purpose proportion and must be documented and applied consistently. For accountants The taxable purpose proportion under section 40-25 must be applied to the cost before calculating depreciation. It must be reviewed annually as the proportion of business use may change. For vehicles, a logbook maintained for a minimum 12-week period is the standard method of establishing business use percentage.

The instant asset write-off applies to plant and equipment, moveable physical assets. Division 43 applies to capital works (buildings, structural improvements, and fit-out) that are permanently attached to a building. You cannot apply the instant asset write-off to the construction cost of a building or to improvements that are structural in nature. The two regimes cover different types of assets. For accountants Division 43 applies to capital works as defined in section 43-20; buildings, extensions, alterations, and structural improvements. The write-off rate is 2.5% per year (40-year life) for most construction after 27 February 1992. Fit-out items that are plant and equipment under Division 40 (e.g. removable partitions, blinds, carpet) are treated separately from the building structure.