The Instant Asset Write-Off Is Ending in 2025 – Here’s What You Need to Know

The Federal Budget for 2025-26 was announced last month, and there was no extension of the instant asset write-off so many business owners have used to get on top of small business cash flow. Without an extension, the scheme will officially end on June 30, 2025. Businesses looking to take advantage of the program must act quickly, or they’ll have to revert to standard depreciation rules after this date.

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What Is the Instant Asset Write-Off?

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Since being introduced in 2015, the program has gained popularity among businesses, becoming an essential element of cash flow and tax planning as well as being a strategic tool to encourage business investment. It enables eligible businesses to instantly write off the cost of eligible depreciating assets costing less than $20,000, instead of spreading it over time through depreciation — essentially reducing taxable income in that financial year.

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As the program is nearing its end, it's important to note that businesses may not be fully aware of the long-term consequences and additional red tape that may follow. It is recommended that businesses seek professional advice before making any decisions.

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Eligibility to use the instant asset write-off on an asset is dependent on a few key factors, including:

• The asset cost less than $20,000.
• Business annual aggregated turnover must be less than $10 million.
• The asset must be first used, or installed ready for use, between July 1, 2023, and June 30, 2025.

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Please be aware that the asset must be installed and prepared for use before 30 June 2025 in order to claim the instant asset write-off. Therefore, prompt action is required.

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The instant asset write-off eligibility criteria and thresholds have changed over the years, so it's important to check with your accountant to confirm eligibility. Since its introduction in 2015, the instant asset write-off has been a valuable tool for small businesses, allowing them to immediately deduct the cost of eligible assets costing less than $20,000. However, with no further extension announced, this benefit will no longer be available from July 1, 2025.

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What Businesses Need to Do Before June 30, 2025

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To claim the instant asset write-off before it ends, businesses must:

• Purchase eligible assets (including new and second hand assets) costing less than $20,000
• Ensure aggregated annual turnover is less than $10 million
• Have the asset first used or installed ready for use by June 30, 2025

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If an asset is not installed and ready for use before the deadline, it won’t qualify for an immediate deduction. That means businesses should finalise their purchases as soon as possible to avoid missing out.

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However, before jumping in, it’s important to consider whether making a purchase just to reduce tax liability is the right move for your business. Spending money unnecessarily can strain cash flow, and any finance used to acquire assets comes with its own tax and cash flow implications, such as interest tax deductions and ongoing debt repayments.

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Before making any decisions, speak with an accountant to determine whether purchasing assets before the deadline aligns with your broader financial strategy.

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Can I write off multiple assets under the instant asset write-off?

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The $20,000 instant asset write-off threshold applies to each individual asset. This means small businesses are able to purchase multiple eligible assets and write them off under the initiative, as long as each asset meets the criteria.

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Can I write off an asset that was over $20,000?

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If you purchase an asset that does not meet the eligibility criteria — for example, its price was more than $20,000 — it will not qualify for immediate deduction, and will need to use a different method of depreciation.

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You may choose to use the small business simplified depreciation rules for any assets over $20,000 to depreciate the asset at a rate of 15% for the first income year, and 30% for the following years.

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What Happens After June 30, 2025?

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From July 1, 2025, businesses will no longer be able to immediately deduct the full cost of new assets under the instant asset write-off. Instead, assets will need to be depreciated over time.

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For small businesses using the simplified depreciation rules, assets under $20,000 will:

• Be added to the small business depreciation pool, depreciated at 15% in the first year and 30% in following years.
• Be fully written off if the total balance of the pool falls below $20,000 at the end of a financial year.

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For businesses not using the small business depreciation rules, assets (including those under $20,000) may be depreciated using either:

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Prime Cost (Straight-Line) Method:

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• This method assumes the asset’s value declines evenly over its effective life.
• Depreciation is calculated as:
  Asset’s cost × (days held ÷ 365) × (100% ÷ asset’s effective life)
• Example: An $80,000 asset with a 5-year effective life would be depreciated at 20% per year ($16,000 annually) until fully written off.

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Diminishing Value Method:

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• This method assumes higher depreciation in the early years, with deductions decreasing over time.
• Depreciation is calculated as:
  Base value × (days held ÷ 365) × (200% ÷ asset’s effective life)
• Example: An $80,000 asset with a 5-year effective life would be depreciated as follows:
  • Year 1: $32,000 (40% of $80,000)
  • Year 2: $19,200 (40% of remaining $48,000)
  • Year 3: $11,520 (40% of remaining $28,800)
  • And so on, until the value is fully written off.

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This change means businesses will have to spread deductions over time, affecting cash flow and tax planning. Business owners should review their asset purchase strategy and consult an accountant to ensure they’re making financially sound decisions.

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Take Action Now

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If you’ve been considering upgrading equipment, vehicles, or other business assets, now is the time to act. The instant asset write-off will not be available from July 1, 2025, so purchasing and installing assets before June 30 is crucial.

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For tailored advice on maximising tax savings, speak with an accountant or financial advisor today.

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