How does depreciation work for small business assets?
Understand how depreciation lets a small business claim the cost of an asset over time, and how simplified rules can apply.
Summary
Depreciation lets a business claim the cost of eligible assets over time. From 1 July 2026, the $20,000 instant asset write-off is permanent for eligible small businesses with annual turnover of less than $10 million.
What this means
Eligible small businesses using the simplified depreciation rules can immediately deduct the business-use portion of eligible assets costing less than $20,000. The threshold applies per asset, so more than one qualifying asset can be written off.
Assets costing $20,000 or more generally enter the small business pool under the simplified depreciation rules rather than being immediately written off. Eligibility also depends on when the asset is first used or installed ready for use and the extent of business use. Keep purchase and usage records to support the deduction.
Typical actions
- Confirm the business has annual turnover of less than $10 million and is eligible for the simplified depreciation rules.
- Identify eligible depreciating assets and their business-use percentage.
- For assets costing less than $20,000, check whether the permanent instant asset write-off applies.
- Pool higher-cost eligible assets under the simplified depreciation rules where required.
- Keep records of cost, date first used or installed ready for use, and business use.
Official sources
Last checked: 25 August 2026
Depreciation and capital expenses and allowances
Main ATO hub for depreciation and capital allowances.
Simpler depreciation for small business
Explains the simplified depreciation rules for small business.
Instant asset write-off for eligible businesses
Explains the instant asset write-off under the simplified rules.
Instant Asset Write-Off made permanent
Australian Treasury Ministers confirm the permanent $20,000 threshold from 1 July 2026 for eligible small businesses.
Related questions
- What business expenses can be claimed?
- What is aggregated turnover?
- What is the small business tax offset?
- How do small businesses pay tax?
Important notice: Tax Clarity is an independent information tool. This page provides general information based on official sources. It does not provide tax, legal, financial, or accounting advice. Tax rules can change, and how they apply depends on your circumstances. For advice about your situation, speak with a registered tax agent or qualified professional.
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