The Australian Taxation Office (ATO) offers an instant asset write-off scheme, allowing eligible small businesses to immediately deduct the cost of certain assets. As of the 2024–25 financial year, businesses with an aggregated turnover of less than $10 million can claim an immediate deduction for assets costing less than $20,000, provided the asset is first used or installed ready for use between 1 July 2023 and 30 June 2025.

This measure is designed to improve cash flow and reduce compliance costs for small businesses by allowing them to instantly deduct the full cost of eligible assets, rather than depreciating them over several years. The $20,000 threshold applies on a per-asset basis, enabling businesses to claim multiple assets, each under the threshold.

However, the 2025–26 Federal Budget announced that the instant asset write-off threshold will revert to $1,000 from 1 July 2025, unless further legislative changes are made.

Despite the benefits, many small and medium-sized enterprises (SMEs) are not fully utilizing the instant asset write-off. A report by ScotPac found that 59% of SMEs planned to invest in their businesses in the six months to August 2025, but the uncertainty surrounding the write-off’s future has caused many to reconsider or delay their investment plans.

Several factors contribute to the underutilization of the instant asset write-off:

• Uncertainty and Legislative Delays: Frequent changes and delays in legislating the write-off thresholds create uncertainty, making it challenging for SMEs to plan their investments confidently.
• Cash Flow Constraints: Many SMEs face cash flow challenges, limiting their ability to make upfront investments, even with the promise of tax deductions.
• Lack of Awareness: Some business owners may not be fully aware of the eligibility criteria or the benefits of the instant asset write-off, leading to missed opportunities.
• Complexity of Tax Rules: Navigating the tax system and understanding the specific requirements of the write-off can be daunting, especially for businesses without dedicated financial advisors.

A recent online article by Rommel Lontayao in Mortgage Professional Australia suggested that only a small percentage of SMEs were actually accessing this opportunity…

Most SMEs missing out on tax deduction: study

OnDeck research shows only one in four small firms are claiming the instant asset write-off.

With the end of the financial year approaching, new research from OnDeck Australia indicates that a significant number of small businesses may be missing out on a valuable tax deduction.

According to the survey from the SME lender, only 26% of small enterprises nationwide are currently claiming the instant asset write-off (IAWO), a federal tax incentive designed to support small business investment.

The IAWO enables businesses with an annual turnover under $10 million to immediately deduct the cost of eligible assets costing up to $20,000, rather than spreading the deduction over several years.

Despite the potential tax benefits and improved cash flow, 36% of businesses said they are not using the deduction, while another 38% were unsure whether they were accessing the scheme.

“This should be a wake-up call for the nation’s small business community,” said Cameron Poolman, Chief Executive of OnDeck Australia. “With only weeks remaining in the current financial year, there is still time for eligible businesses to make a strategic purchase and reduce their taxable income. But the asset must be in place by June 30 this year to claim the IAWO.”

Poolman said that the IAWO can support productivity by encouraging investment in business equipment such as tools, vehicles, and office supplies. It may also help firms expand their service offerings or upgrade customer-facing facilities.

“Moreover, the IAWO reduces a small business’s taxable income, driving a reduction in the company’s annual tax bill,” he said. “This can free up funds for investment in other areas of the business such as marketing, research, or staff development.”

OnDeck’s earlier research suggests that access to finance could play a role in increasing uptake, with 18.3% of small business owners saying they would use extra funding to upgrade assets or facilities.

“With only weeks to go before June 30, I encourage small businesses to speak with their tax adviser to understand if they would benefit from the IAWO in the current financial year,” Poolman said.

Contact Indigo Financial on (08) 8212 8585 if you need help understanding and planning your instant asset write-off before June 30, or any of your other accounting and taxation needs.

Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.