Instant Asset Write-Off for Residential Builders (Australia)

The current position for 2026-27

As at 18 July 2026 the instant asset write-off threshold for the 2026-27 income year is $1,000. This is the permanent small business threshold in section 328-180 of the Income Tax Assessment Act 1997. An eligible small business can immediately deduct the business portion of a depreciating asset that costs less than $1,000 and is first used or installed ready for use during the year.

The $20,000 threshold that many builders relied on in recent years has lapsed. It applied only to the 2023-24, 2024-25 and 2025-26 income years, that is to assets first used or installed ready for use between 1 July 2023 and 30 June 2026. It ended on 30 June 2026 and does not apply to assets first used from 1 July 2026.

A permanent $20,000 instant asset write-off is proposed in the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026, which was read a second time on 25 June 2026. That Bill is not yet law. Until it passes both houses and receives assent, plan on the $1,000 threshold for 2026-27 and treat any $20,000 claim for the new year as conditional.

What the write-off does

The instant asset write-off lets an eligible small business immediately deduct the business portion of the cost of a depreciating asset in the year it is first used or installed ready for use, rather than depreciating it over several years. For a residential builder running a small business it is one of the more useful concessions in the simplified depreciation rules.

The threshold applies per asset, not per business. At the $1,000 threshold a builder who buys three separate tools each costing less than $1,000 can write off all three in the same year. If an asset costs the threshold amount or more, the builder cannot use the instant write-off. The asset is allocated to the general small business pool instead, where it is depreciated at 15 per cent in the first year and 30 per cent in later years.

Who qualifies

You need to be a small business entity with aggregated turnover under $10 million and you must choose to use the simplified depreciation rules. Aggregated turnover is your own turnover plus that of any connected entities or affiliates. A sole trader, a partnership, a company or a trust trading as a builder can all qualify if they meet the turnover test.

First used or installed ready for use

Buying the asset is not enough. The deduction attaches to the income year in which the asset is first used or installed ready for use for a business purpose. An asset paid for on 28 June but not delivered and commissioned until July falls into the next income year. Keep the tax invoice and the finance contract, and keep evidence of the commissioning date. A photo or delivery note helps when the timing is tight.

The 30 June 2026 trap

The change of threshold on 1 July 2026 makes timing matter more than usual. An asset costing between $1,000 and $20,000 that was first used or installed ready for use on or before 30 June 2026 can still be claimed under the $20,000 threshold in the 2025-26 return. The same asset first used from 1 July 2026 sits above the $1,000 threshold and goes to the small business pool unless the pending Bill becomes law.

Cars and the car limit

Utes, vans and light trucks can be eligible assets. A car limit caps the cost you can use to work out depreciation on a passenger vehicle. The car limit for the 2025-26 income year is $69,674. The car limit does not apply to a vehicle that is not a passenger vehicle, for example a dual cab designed mainly to carry goods or a vehicle with a payload of one tonne or more. Where the car limit does not apply, you use the vehicle's full cost.

GST and the threshold

If you are registered for GST and can claim the full GST credit, the threshold is the GST-exclusive cost. If you are not registered for GST, you use the GST-inclusive cost.

Assets that are excluded

Some assets sit outside the simplified depreciation rules. Buildings and capital works fall under Division 43 of the Income Tax Assessment Act 1997, not simplified depreciation. Horticultural plants, software allocated to a software development pool and assets leased out for more than half the time are also excluded. Trading stock is not a depreciating asset, so timber, fixtures and fittings that form part of the build are not in scope.

Talk to your accountant

The write-off interacts with the car limit, GST input tax credits and capital gains when you later sell the asset. Timing around 30 June 2026 and the status of the pending Bill can change the answer for a specific purchase, so confirm eligibility with a registered tax agent for your structure and the year the asset is first used.