For more than a decade the instant asset write-off has been the tax measure that never sat still. The threshold moved almost every year, extensions arrived weeks before the previous window closed, and firms spent every autumn telling clients that the rule they were counting on might or might not survive the next Budget. The 12 May 2026 Budget proposes to end that pattern by making the $20,000 threshold permanent from 1 July 2026, and the profession's representative bodies welcomed it specifically for the certainty it promises rather than for the number itself. It is a genuinely useful change, but there is an important distinction firms need to hold clearly this year, because the announcement and the law are not the same thing, and advising a client as though they were is exactly how a good intention becomes an error.
What is settled, and what is still only announced
The write-off works by letting an eligible small business immediately deduct the full cost of a qualifying asset in the year it is first used or installed ready for use, rather than depreciating it over years. Two facts about its current status need to be kept apart. First, the $20,000 threshold for the 2025-26 income year is settled law, so any asset first used or installed by 30 June 2026 sits on firm ground and can be advised on with confidence. Second, the permanent extension announced in the Budget, which would carry the $20,000 threshold forward from 1 July 2026, is a proposal and has not yet passed Parliament. Until it does, the standing legislated position from 1 July 2026 is a threshold of $1,000, and a firm cannot responsibly tell a client that a purchase made in, say, August 2026 qualifies for the $20,000 write-off, because that depends entirely on whether the Bill becomes law. The safe practice for any asset first used from 1 July 2026 is to confirm the current legislative status on the ATO site before committing a client to a position, exactly as the last decade of last-minute changes has trained us to do.
This is not pedantry. The whole reason the permanence measure is welcome is that it would remove this very uncertainty, but it only removes it once it is enacted. Announcing an intention to make something permanent does not make it law, and the gap between the announcement in May and the eventual legislation is precisely the window in which a client could act on a threshold that is not yet available. The advice that protects the client is to treat the 2025-26 write-off as the certainty it is, and the 2026-27 permanence as the likely-but-not-yet outcome it is.
The mechanics that stay true regardless of the threshold
Whatever the threshold turns out to be, several rules govern how the write-off is applied, and getting these right matters more than remembering a number. The threshold is tested per asset and on a GST-exclusive basis for a registered business, so a client registered for GST strips the GST out first, tests the GST-exclusive cost against the threshold, and claims the GST separately as an input tax credit. It applies to the full cost of the asset, not the deductible portion, so an asset costing more than the threshold does not qualify even if business-use apportionment would bring the deductible amount below it, and instead goes into the small business simplified depreciation pool. The qualifying event is first use or installation ready for use within the income year, not the purchase or order date, which is the trap that catches end-of-year purchases where delivery or installation slips into the next year. And the income tax write-off and the GST credit are separate claims sitting in separate places, the deduction in the income tax return on the GST-exclusive cost and the credit on the BAS, so folding the two together or claiming the GST twice creates an error that spans both.
Vehicles deserve their own note because they cause the most confusion. A passenger vehicle is subject to the car limit, which caps the value used to calculate depreciation and is indexed by the ATO each income year, so the right figure is always the one for the year the car was first used rather than a number carried over. A commercial vehicle with a payload over one tonne is not subject to the car limit and can be written off in full where its cost is under the applicable threshold. None of this changes with the permanence measure, which is why the durable skill is understanding the mechanics rather than memorising this year's dollar figures.
How firms should handle it with clients this year
The practical stance follows directly from the split between what is settled and what is not. For the 2025-26 year, the write-off is available and firms can advise clients to plan asset purchases around it with confidence, provided the asset is genuinely first used or installed by 30 June and genuinely needed, because a deduction is not a rebate and buying for the tax break alone still leaves the client out of pocket. For 2026-27 and beyond, the message is that the Government has signalled the $20,000 threshold will continue, that this is very likely but not yet law, and that any purchase timed for the new year should be confirmed against the enacted rules before it is treated as deductible at $20,000. Firms that get ahead of this will add a standing item to their asset-purchase conversations: check the threshold and its legislative status for the year the asset is first used, every time. The permanence measure, once passed, is exactly the certainty the profession has wanted for years. Until it passes, the certainty applies to this year, and the discipline of checking is what protects clients through the transition.
