It has been a long time coming, but the Government finally passed legislation increasing the instant asset write-off threshold for the year ending 30 June 2025 to $20,000. This was announced back in the 2024-25 Federal Budget but the Government faced a number of hurdles in terms of passing the legislation.

This basically means that individuals and entities who carry on a business with turnover of less than $10m can often claim an immediate deduction for the cost of depreciating assets (eg, plant and equipment) that are acquired during the 2025 financial year as long as the cost of the asset, ignoring GST credits that can be claimed, is less than $20,000.

If you are thinking about purchasing an asset before 30 June 2025 with the hope of claiming an immediate deduction, then please reach out to us to confirm the position. The rules contain a number of tricks and traps which we can help you to navigate.

Overview of the $20,000 Instant Asset Write-Off

The Australian Government has legislated a temporary increase in the instant asset write-off threshold from $1,000 to $20,000 for the 2024–25 income year. This measure aims to support small businesses by allowing them to immediately deduct the full cost of eligible assets, thereby improving cash flow and reducing compliance costs.

Key Details:

• Eligibility: Small businesses with an aggregated annual turnover of less than $10 million.

• Asset Threshold: The $20,000 limit applies on a per-asset basis, enabling businesses to write off multiple assets, each costing less than $20,000.

• Timeframe: Assets must be first used or installed ready for use between 1 July 2024 and 30 June 2025.

• Asset Types: Both new and second-hand depreciating assets are eligible.

• GST Consideration:

  • If registered for GST and entitled to full input tax credits, the asset’s cost is considered exclusive of GST.

  • If not registered for GST, the asset’s cost includes GST.

• Depreciation Pool: Assets costing $20,000 or more can be allocated to the small business depreciation pool and depreciated at:

  • 15% in the first income year.

  • 30% in subsequent years.

• Pool Balance Write-Off: If the balance of the small business pool is less than $20,000 at the end of the 2024–25 income year, the entire balance can be written off.

Important Considerations

• Car Limit: For passenger vehicles (excluding motorcycles) designed to carry less than one tonne and fewer than nine passengers, a car limit applies. For the 2024–25 income year, this limit is $69,674. If the vehicle’s cost exceeds this limit, the deduction is capped accordingly.

• Exclusions: Certain assets are excluded from the simplified depreciation rules, including:

  • Assets leased out for more than 50% of the time.

  • Horticultural plants.

  • Software allocated to a software development pool.

  • Capital works (e.g., buildings and structural improvements).

  • Assets used in research and development activities.

• Private Use: Only the business-use portion of the asset’s cost is deductible. If an asset is used for both business and private purposes, the deduction must be apportioned accordingly.

• Record Keeping: Maintain accurate records of asset purchases, usage, and depreciation calculations to substantiate claims.

Post 30 June 2025

Unless further legislative changes are enacted, the instant asset write-off threshold is scheduled to revert to $1,000 from 1 July 2025. Businesses should plan asset acquisitions accordingly to maximize the benefits of the current threshold.

Contact Indigo Financial on (08) 8212 8585 for all your accounting 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.