By Eugene Maslov, Founder and Finance Broker at Lendr360
Published 12 October 2026 · Last reviewed 12 October 2026
A tax deduction and a government refund are two very different things.
From 1 July 2026, the instant asset write-off threshold is permanently set at $20,000 for eligible small businesses. That is useful, but the name can create the wrong impression. It does not mean the Australian Taxation Office pays for a $20,000 asset or returns its full purchase price to the business.
The misconception
“If my business buys equipment for less than $20,000, the government refunds the cost.”
The reality
The instant asset write-off is an immediate tax deduction. Subject to eligibility, it may allow the business-use portion of a qualifying asset to be deducted in the income year in which the asset is first used or installed ready for use.
A deduction reduces taxable income. It is not a rebate for the invoice amount, and it does not remove the need to pay the supplier, fund the purchase or manage the business’s cash flow.
Who may qualify?
Current ATO guidance says a business may qualify if it carries on a business, has aggregated annual turnover below $10 million and has chosen to use the simplified depreciation rules. The asset must also satisfy the relevant eligibility requirements.
For an eligible asset to be immediately deducted under the $20,000 threshold, the asset must cost less than $20,000 and be first used or installed ready for use during the relevant income year. The threshold is applied asset by asset, and both new and second-hand assets may qualify.
The calculation is not always as simple as comparing the advertised price with $20,000. GST treatment depends on whether the business is registered for GST, and only the taxable business-use portion is deductible. Some assets are excluded from the simplified depreciation rules. Ask your registered tax adviser to confirm the treatment before relying on the deduction.
What happens if the asset costs $20,000 or more?
An asset costing exactly $20,000 does not fall below the threshold. Current ATO guidance says an eligible small business using simplified depreciation generally adds an asset costing $20,000 or more to its small-business depreciation pool and claims deductions under those rules instead.
That does not automatically make the purchase unattractive. It simply means the tax treatment is different from an immediate write-off.
Do not let the deduction make the purchase decision
A tax deduction can improve the after-tax cost of an eligible purchase, but it cannot make unsuitable equipment productive. Before buying, consider:
- what work or revenue the asset is expected to support;
- whether the asset will reduce hire, labour, repairs or downtime;
- the deposit, GST, insurance, servicing and installation costs;
- when the asset will actually be delivered and ready for use;
- how much working capital will remain after the purchase; and
- whether the expected working life suits the proposed finance term.
Finance and tax are separate decisions
Whether an asset is paid for in cash or financed does not turn the instant asset write-off into a refund. The business still needs to fund the asset and meet every repayment or other commitment associated with the purchase.
Your accountant can confirm the tax treatment. Lendr360 can help you compare finance structures for eligible business equipment and consider the effect on cash reserves, repayments and the expected working life of the asset.
Explore Lendr360’s wheeled and non-wheeled equipment finance and machinery and plant finance options, or call 1800 870 779.
Important information
General information only and not tax or accounting advice. Obtain advice from a registered tax adviser for your circumstances. Business-purpose finance only; this content does not cover personal, domestic, household or mixed-purpose credit. Finance is subject to lender approval, eligibility, credit assessment, security, fees, charges and terms. Lucrum Services Pty Ltd t/as Lendr360 (ABN 58 693 471 466), Authorised Credit Representative 575722 of Fintelligence Pty Ltd (ABN 80 625 017 174), Australian Credit Licence 511803.
Sources and further reading
Australian Taxation Office — Can my small business claim the $20,000 instant asset write-off? — current eligibility, threshold and timing guidance
Australian Taxation Office — Instant asset write-off for eligible businesses — official detailed guidance
Forbes Australia — Federal Budget 2026 winners and losers — business-media context
Sources checked 12 October 2026. Recheck the ATO page immediately before publication because tax rules and administrative guidance can change.