Instant asset write-off is now permanent: Here's what that means for SMEs

It's official: the $20,000 instant asset write-off is here to stay. Parliament passed the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 on 19 August, locking the write-off in permanently alongside a related loss carry-back measure for eligible companies [1].

It applies to assets first used or installed for a taxable purpose from 1 July 2026. To be eligible, your business needs an annual turnover under $10 million, and the write-off works per asset, so you can claim it on multiple purchases in the same financial year, not just one. Around 300k small businesses used it in 2024–25 alone [2].

Sounds like a big deal, and it is, but mostly because of what it removes. The scheme's been extended again and again in recent years (including a 12-month stopgap in 2025), so a lot of businesses were already planning as if it would stick around. Now it's just... locked in. The real question is how that changes the way you plan.

Quick refresher: How the write-off works

The instant asset write-off allows eligible small businesses with an annual turnover under $10 million to immediately deduct the taxable-purpose proportion of eligible depreciating assets costing less than $20,000. It applies per asset, so a business can write off several qualifying purchases in the same financial year

In practical terms, this typically applies to items like tools, machinery, technology, and other equipment used to run the business.

Instead of claiming depreciation over several years, the full cost is deducted in the year of purchase. The main effect is timing: it brings forward tax deductions rather than changing the total amount that can be claimed over time.

Treasury estimates the measure will reduce compliance costs for eligible small businesses by a combined $32 million a year [1]. This means less time spent on depreciation schedules, and more on running the business.

What permanence changes in practice for business planning

The biggest change is not having to guess whether the write-off will still be around next year. Up until now, the scheme ran on a year-to-year extension cycle, with businesses needing to factor in whether it would continue in its current form at each budget.

With the legislation now passed, that cycle of "will it be extended?" speculation is over.

For owners, that has a few practical flow-on effects:

• Investment planning becomes more predictable over the long term
• Asset decisions are less likely to be influenced by policy deadlines
• Financial planning becomes more consistent across multiple years rather than reset annually

The Tax Institute's head of tax and legal, Julie Abdalla, has said the change removes the "ongoing cycle of temporary extensions" that previously made compliance harder for small and medium businesses [1]. The write-off is also one of several small business measures in this legislation, alongside the two-year loss carry-back and expanded CGT concession eligibility [2].

What doesn’t change

It’s just as important to be clear about what this policy doesn’t do. Making the instant asset write-off permanent doesn’t:

• Reduce the upfront cost of buying equipment
• Change borrowing requirements or lending conditions
• Expand the types of assets or businesses that qualify in a meaningful way
• Change when most SMEs choose to invest in a material way

Investment decisions are still primarily driven by business needs, whether that's capacity constraints, efficiency improvements, customer demand, or replacing ageing equipment.

The tax treatment can improve the economics around the edges, but it rarely determines whether a purchase is viable in the first place.

How the change shows up in investment timing

As that predictability flows through, the impact is most visible in how investment decisions are paced throughout the year.

Over time, SMEs may see:

• Less of the familiar EOFY  rush to bring forward purchases
• More even timing of equipment upgrades and replacements in industries with regular capital expenditure needs, like construction, logistics, manufacturing, and trades
• A clearer and more stable comparison point when weighing up purchasing, leasing, or financing options

These shifts are likely to happen gradually rather than all at once. The drivers behind investment decisions — cash flow position, demand, and operational needs — remain the primary influence, with the tax treatment sitting alongside those factors in the decision-making process.

How SMEs should think about it

The simplest way to view the instant asset write-off is as a timing benefit. It can improve the after-tax cost of an asset, but it works best when it supports an already sound investment decision, rather than being the reason to make one.

A simple way to approach it:

• Would this asset still stack up without the upfront tax deduction?
• Will it improve efficiency, capacity, or revenue in a meaningful way?
• Can my business comfortably manage the cash flow required to buy it or handle repayments?

If the answer relies heavily on the tax treatment alone, it’s usually worth revisiting timing or structure.

{{first-banner}}

Steady policy, steady expectations

Now that the legislation has passed, the most meaningful outcome for SMEs is predictability. Knowing how the policy works and that it's no longer subject to annual renewal makes planning simpler, particularly for those that regularly invest in assets.

But the underlying decision logic remains the same. Tax settings can improve the financial outcome of an investment, but they don't replace the need for the asset to make sense for the business.