Small Business $20,000 asset write-off extension

The $20,000 Instant Asset Write-Off: What Small Businesses Need to Know for 2024-25

The Australian Government has extended the $20,000 instant asset write-off for small businesses into the 2024-25 financial year, providing another opportunity to make smart business investments while reducing taxable income. This popular tax incentive allows eligible businesses to claim an immediate deduction on asset purchases rather than depreciating them over several years. Here’s what you need to know about this extension, who qualifies, what you can and cannot claim, and how to make the most of it.

What Is the $20,000 Instant Asset Write-Off?

The instant asset write-off is a tax deduction that enables eligible small businesses to immediately deduct the full cost of eligible assets costing less than $20,000 in the same financial year they are purchased and installed. This helps businesses manage cash flow and reinvest in growth by lowering taxable income in the year of purchase.

The scheme was set to expire but has been extended for the 2024-25 financial year, meaning small businesses still have access to this valuable tax benefit.

Who Is Eligible?

To qualify for the instant asset write-off in 2024-25, businesses must:

• Have an aggregated annual turnover of less than $10 million
• Purchase and install or use the asset between 1 July 2024 and 30 June 2025
• Ensure that the cost of the asset is below $20,000 (excluding GST if registered for GST)

What Can You Claim?

The write-off applies to new and second-hand business-related assets used for income-producing activities. Some examples of claimable items include:

• Technology & Equipment – Computers, laptops, printers, office furniture
• Machinery & Tools – Construction tools, farming equipment, medical equipment
• Vehicles – Cars, vans, or motorbikes (business use portion only)
• Business Improvements – Security systems, signage, POS systems
• Software & Digital Assets – Accounting software, website development

What Can’t You Claim?

While the write-off is generous, some exclusions apply. The following cannot be claimed under the instant asset write-off:

• Assets costing $20,000 or more – These must be depreciated over time under normal tax rules
• Leased or rented assets – Only owned assets qualify
• Capital improvements to buildings – These fall under separate tax depreciation rules
• Assets not used for business purposes – Personal use assets don’t qualify
• Stock and trading inventory – Business inventory is not eligible
• Hired or second-hand assets not purchased outright – Hiring equipment is an expense, not an asset purchase

How to Claim the Instant Asset Write-Off

Claiming the instant asset write-off is straightforward but requires careful record-keeping:

1. Purchase & Use the Asset – Ensure the asset is bought, installed, and in use by 30 June 2025.
2. Check GST & Invoice Details – If registered for GST, exclude GST from the purchase price when calculating eligibility.
3. Include in Your Tax Return – Deduct the cost under ‘depreciation’ in your 2024-25 tax return.
4. Maintain Records – Keep invoices, receipts, and proof of business use for at least five years in case of an ATO audit.

Maximising the Benefit for Your Business

If your business is planning to upgrade equipment, buy new tools, or invest in technology, this is a great time to do it. Consider:

• Investing in productivity-boosting assets – Buy equipment that increases efficiency.
• Upgrading outdated technology – Ensure your business remains competitive with modern tools.
• Timing your purchases wisely – Buying before 30 June 2025 allows you to claim the deduction sooner.

The $20,000 instant asset write-off continues to be a valuable opportunity for small businesses to manage cash flow, invest in growth, and reduce taxable income. With the extension into 2024-25, businesses should take advantage of this incentive before it potentially changes in future budgets.

If you’re unsure about eligibility or want to discuss the best tax strategies for your business, the team at Fincare Accountants is here to help. Get in touch with us to ensure you’re making the most of the tax benefits available to you!