For about five years the $20,000 instant asset write-off (IAWO) has been a year-to-year extension. Each Budget reset it. Each year small business operators had to time purchases around whether the threshold would survive 30 June. The 2026-27 Budget puts a stop to that game — the $20,000 IAWO is now permanentfor small businesses with aggregated turnover up to $10M. Treasury estimates the change frees up around $890M of small-business cash flow over five years. This post is the practitioner's read on what changes, what does not, and how to plan when the threshold is locked in.
What the rule does
Small businesses (aggregated annual turnover under $10M) can immediately deduct the full cost of eligible depreciating assets that cost less than $20,000, in the year the asset is first used or installed ready for use. Without the IAWO the asset would go into the simplified small-business depreciation pool and be deducted over multiple years.
The $20,000 threshold is per asset, not a total cap. A small business buying ten qualifying assets at $19,500 each can write off $195,000 in the year — subject to the assets being separately identifiable and meeting the use-in-business test.
What changes from making it permanent
Planning horizon extends
The biggest cash-flow benefit of permanency is that you can sequence capital expenditure across financial years without worrying about a threshold drop on 1 July. A tradie planning to replace three utes over three years can buy one a year instead of bringing them forward to a single pre-EOFY purchase to lock in the deduction.
End-of-year rush dampens
Industries that supply small business (cars, tools, IT, plant) typically saw a June surge driven by IAWO certainty. With permanency, that surge softens. From a small-business buyer's perspective, more buying power outside June — dealers no longer have the leverage of "buy by 30 June or lose the deduction."
Cash-flow impact
Treasury estimates the change improves small-business cash flow by around $890M over the next five years and saves around $32M in compliance costs annually (Budget 2026-27, tax reform page). The compliance saving is the time agents spend each year explaining whether the IAWO is in effect and what the threshold is — we expect to spend that time on other planning conversations instead.
What does NOT change
- The $20,000 threshold is unchanged. Anything $20,000 or above goes into the small-business depreciation pool (15% in year one, 30% subsequent).
- The $10M aggregated turnover test is unchanged. Businesses above $10M turnover are excluded (they use Division 40 ordinary depreciation rules).
- The asset must be used for business purposes. Personal-use portion is excluded.
- Cars are subject to the car limit ($69,674 for FY26, indexed). Vehicles costing more than the limit can only write off up to the limit.
- Second-hand assets still qualify (unlike the temporary full expensing rules of 2020-22, which were new-only).
Common timing questions
"Should I still buy before 30 June?"
Only if the asset is going to deliver business income or improve operations in FY26. Tax timing alone is no longer a reason — the threshold is there next year too. If the equipment is genuinely useful and you have cash flow, buying earlier means earlier deduction. If you are stretching cash flow to buy by 30 June just to "get the deduction", you have lost the strategic value of the change.
"What if I have three assets I want to buy?"
Each asset has its own $20,000 threshold. If they are genuinely separate assets (separate function, separate installation, used independently) you can buy and write off all three in the same year. If they form a "single composite item" — like five components of one machine — the ATO treats them as one asset and aggregates the cost.
"Does this interact with the new $1,000 individual deduction?"
No. The $1,000 instant work-related deduction is for PAYG employees (Item D5). The IAWO is for business assets owned by small businesses with ABN. Sole traders use IAWO for business assets and the $1,000 instant deduction does not apply to that side of their tax return.
EOFY 2026 — what we tell clients
Same advice we have given each of the last several years, plus one update:
- Identify capital purchases coming up in the next 12 months that fall under $20,000 each.
- Check the asset is "ready for use" by 30 June — installed, connected, capable of generating income for the business.
- Keep the invoice, payment evidence, and a brief note of business use. Standard substantiation.
- The update: do not buy something you don't need just because the threshold is "in effect this year." That rationale is dead now — the threshold is permanent.
Our EOFY 2026 checklist goes through the other small-business levers (concessional super, prepaid expenses, debtor write-offs, stocktake) for the current financial year.
Sources
- Budget 2026-27 tax reform page (budget.gov.au/content/04-tax-reform.htm)
- Prime Minister media release — Tax reform for workers, businesses and future generations
- SmartCompany — $20,000 instant asset write-off to become permanent
- ATO Small Business Support — $20,000 instant asset write-off (ato.gov.au)
