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Instant Asset Write-Off for Sole Traders: How It Works in 2026

Instant Asset Write-Off for Sole Traders: How It Works in 2026

Published 22 Sep 2026· Written by Talha Qamar

The instant asset write-off could let you claim the cost of a qualifying business asset. But you must establish that the asset you want to claim a deduction for meets the eligibility requirements.

Cost is relevant, but the asset's eligibility and the point at which you first use it or install it for use also determine whether you qualify for the deduction.

Quick Answer: Under the instant asset write-off 2026, sole traders and other small businesses with an aggregated turnover below $10 million may deduct the business portion of an eligible asset's cost from their taxable income.

The asset must be less than $20,000, and the deduction applies in the year it is installed for use or first used.

Say you buy a $12,000 piece of equipment for your business in September 2026, and the equipment meets the other eligibility requirements. If you install it and have it ready for use in October 2026, the deduction falls in the income year that includes October 2026.

The amount you can claim may differ from the asset's purchase price and this guide explains everything you need to know about claiming the deduction.

What Is the Instant Asset Write-Off?

An instant asset write-off, sometimes called the instant tax write-off, is a way for eligible businesses to claim the cost of qualifying assets. Most business assets are usually depreciated over their life, so the standard deduction is spread across the years the asset is used.

This write-off changes that as you can now claim the cost of assets sooner in the year it qualifies.

According to the Australian Government 2026-27 Budget, the threshold for this scheme is $20,000 per asset for this income year.

The same budget made the $20,000 threshold permanent from 1 July 2026, so the limit will continue to apply in future income years.

Instant Asset Tax Write-Off 2025 vs. Instant Asset Write-Off 2026

The instant asset write-off threshold stood at $20,000 in both 2025 and 2026, but the status of the measure changed between the two years.

During the 2024-25 income year, eligible small businesses with aggregated turnover below $10 million could claim an immediate deduction for eligible assets costing less than $20,000. The asset had to be first used or installed ready for use between 1 July 2024 and 30 June 2025.

The 2026 position keeps the $20,000 threshold but makes it permanent.

Who Is Eligible for the Instant Asset Write-Off in 2026?

The Australian Taxation Office (ATO) specifies the requirements for the instant asset write-off.

  • Your business must have an aggregated turnover of less than $10 million.
  • You must use the simplified depreciation rules for small businesses. (They are the rules under which eligible small businesses in Australia can claim deductions for certain depreciating assets more simply.)
  • The asset must cost less than $20,000.
  • You must first use the asset, or install it ready for use, in the income year in which you claim the deduction.
  • The asset under question must be for business purposes only. Any private use affects the amount you may claim.
  • The $20,000 threshold applies to each individual asset, so multiple qualifying assets may be written off in the same income year.
  • Certain costs added to an asset that was previously written off may qualify for a deduction under the rules for improvements and other cost additions.
  • Some assets are excluded from the instant tax write-off 2026, even when their cost falls below the threshold.

Eligible Assets and Exclusions for Sole Traders

At the asset level, the ATO distinguishes between purchases that qualify for the write-off and those that fall outside it.

  • Tools, machinery, computers and other items needed for business operations qualify when they meet the eligibility criteria.
  • Motor vehicles that carry less than one tonne and fewer than nine passengers. The deduction may further be limited by the car limit (was $69,674 for the 2025-26 period.)
  • New and second-hand assets that meet the other eligibility requirements.
  • Multiple assets, where each costs less than $20,000.

The following are the exclusions:

  • Leased assets are excluded when you lease them out, or expect to lease them out, for more than fifty percent of the time, unless an applicable exception applies.
  • In-house software does not qualify when you allocate its development expenditure to a software development pool.
  • R&D assets are excluded if you use them for research and development activities.
  • Buildings and other capital works follow separate deduction rules.
  • Low-value pool assets that were already in that pool before you began using the simplified depreciation rules.

How to Calculate Your Asset Deduction

Only the portion of the asset's cost that you use for business qualifies for the deduction.

So before you claim the instant tax write-off in 2026, you must ask yourself these two questions:

  • Does the asset fall below the threshold?
  • How much of its cost relates to taxable business use?

When a business asset costs $10,000 and has 80% business use, the deductible amount would be $8,000.

A 100% business-use asset has no private-use reduction, so the deductible amount starts with the full eligible cost.

Private use reduces the amount you can claim. However, the asset's entire cost must fall below the relevant threshold.

So a $25,000 asset with 80% business use has a $20,000 business-use portion, but its full $25,000 cost still sits above the threshold.

Goods and Services Tax or GST also affects the cost figure used when checking the threshold. Businesses that are registered for GST may claim GST credits on eligible business purchases.

The ATO uses a GST-exclusive or GST-inclusive cost for the threshold test, and this depends on the business's GST status.

What Happens to Assets That Do Not Qualify?

Assets that do not qualify for instant tax write-off may still be eligible for deduction under other depreciation rules.

Both the instant asset write-off 2025 and 2026 explain that an asset above the relevant threshold is claimed over time through depreciation.

But when you sell or dispose of the asset, a balancing adjustment may apply (this is the amount added to your taxable income or claimed as deduction when you dispose of an asset.)

What Happened to Temporary Full Expensing?

This scheme applied to eligible assets held from 6 October 2020 and it ended on 30 June 2023.

Temporary full expensing was a separate tax measure that gave eligible businesses an immediate deduction for the full cost of eligible assets.

As of 1 July 2023, the instant asset write-off is what applies to small businesses under the current depreciation rules. It has a $20,000 threshold that just became permanent as of 1 July 2026.

How You Can Claim the Instant Asset Write-Off

These steps help you claim an eligible asset's cost under the tax write-off.

  • Check whether the asset meets the instant asset tax write-off requirements that apply to your business.
  • Calculate the business portion of the asset's cost if you use it for both business and private purposes.
  • Keep the purchase records and evidence of business use. You may need to support the deduction if the ATO asks you to substantiate your claim.
  • Claim the eligible amount in your tax return for the relevant income year. This date is based on when you first used the asset or installed it ready for use.

Conclusion

The instant asset write-off could reduce your taxable income if your business is eligible and the asset meets all requirements. Just remember, the deduction is only for the business portion of the asset's cost in the income year you had it ready for use or used it for the first time.

Before you claim the deduction, check that the asset qualifies, separate business from personal use, and then ensure you have records that support both the purchase and your claim.

The records may include:

  • The purchase invoice
  • Proof of payment
  • Usage records to show the date you first used it
  • Records of personal and business use if you used the asset for both purposes

Good record-keeping is what makes any of this defensible if the ATO asks. See what counts as a compliant record and how long you need to keep it.

No matter how you claim the asset, the evidence needs to stay available if the ATO asks for it, sometimes years later. Instant Receipts handles this part for you by capturing the purchase invoice when you buy the asset, recording the business and private use split and filing it against the transaction instead of leaving it loose in an inbox or shoebox.

Frequently Asked Questions

Can a Small Business Get a $20,000 Instant Asset Write-Off?

Yes. A small business may claim the instant asset write-off for the business portion of an eligible asset that costs less than $20,000, that is if it meets the other requirements.

The business must have an aggregated turnover below $10 million, and the asset must be first used or installed ready for use within the relevant income year.

What is the ATO Instant Asset Write-Off Limit for 2026?

The ATO instant asset write-off limit for 2026 is $20,000 per asset for eligible small businesses. So, a business asset must cost less than the $20,000 threshold and still meet other eligibility criteria to qualify for immediate reduction.

What Assets Can Be Immediately Written Off?

Eligible depreciating assets that cost less than $20,000 may qualify when they meet the applicable requirements. Examples include business equipment, tools, computers and motor vehicles, subject to specific rules that apply to each asset.

However, capital works, horticultural plants and certain assets that are excluded do not qualify for the instant asset write-off.