Tradies — the $20k instant write-off is back, with a catch

Does this affect me?

If you run a small business — sole trader, partnership, company or trust — with turnover under $10 million, yes. You can deduct the full cost of work gear under $20k in the year you buy it, instead of spreading it over 8+ years. If you're a PAYG employee, this isn't for you (your version is the $1k WFH deduction). Above $10M turnover? You're out.

Quick test:

• Aggregated turnover under $10M? You're in.
• Buying gear that costs under $20k each (GST-exclusive if GST-registered)? Each one qualifies — no annual cap on how many.
• Sole trader / ABN with no company? Still in — entity structure doesn't matter, turnover does.
• Buying a $60k ute or a new shed? Out — that's over the threshold (and buildings are excluded anyway).
• Already bought gear in 2025-26? The current version (also $20k) still applies; the permanent version kicks in 1 July 2026.

TL;DR

The $20,000 instant asset write-off is now PERMANENT from 1 July 2026 — but only for small businesses with turnover under $10 million. Each asset under $20k can be deducted in full the year you buy it. The cap is per asset, not per year — so a sparkie can deduct three $19k utes in the same year and claim the lot.

No more annual cliffhangers about whether the threshold gets extended. Treasury reckons the measure delivers about $890 million in cash-flow improvement over 5 years plus $32M/yr in compliance savings. Real money — but anyone telling tradies "you can write off anything" is wrong.

Jargon decoder:

• Instant asset write-off (IAWO) = deduct the whole cost of a business asset in the year you buy it, instead of slowly over its useful life.
• Depreciation = the slow version: claiming a portion of the asset's cost as a deduction each year over its useful life (e.g. a ute over ~8 years).
• Aggregated turnover = your business's revenue, plus revenue from related/connected entities. Stops big groups dodging the cap by splitting into "small" arms.
• Per-asset basis = the $20k limit applies to each thing you buy separately, not to total spending for the year.
• GST-exclusive = if you're GST-registered, the $20k is the price before GST (because you claim GST back separately).

What's NOT in this budget

• A higher threshold — still $20,000 per asset (not $30k, not $150k).
• Eligibility for medium businesses above $10M turnover — capped firmly at small business.
• A return of the COVID-era temporary full expensing (uncapped).
• A write-off for sole-trader personal expenses — has to be a depreciating business asset.
• Inclusion of buildings or capital works — these are excluded as always.
• A company-only deal — sole traders, partnerships and trusts all qualify if turnover ≤$10M.

What IS in this budget

Permanent $20,000 instant asset write-off — from 1 July 2026

How to read this table: Think of it as the "do I qualify?" checklist. The big ones: turnover under $10M, asset under $20k each, used in the business, first plugged in or driven before 30 June. The ATO's own guidance — Instant asset write-off for eligible businesses — is the source of truth at lodgement time.

How the cash-flow maths works

• Buy a $19,000 ute → deduct the full $19k in year 1 instead of depreciating over ~8 years.
• Tax saving at the 25% small-co rate: $4,750 in the buying year.
• Same purchase under normal depreciation: ~$595/yr deduction → ~$149 of tax saving in year 1.
• Net effect: cash in pocket earlier — better for reinvestment, hiring, payroll.

Bundled with companion small-business reforms

What counts as an "asset"

• Plant, equipment, tools, vehicles (subject to car limit), tech, fit-out.
• Must be a depreciating asset used in the business.
• Buildings, capital works (Division 43) and trading stock are out.
• Cars are subject to the standard luxury car limit (~$69,674 for 2025-26) — the deduction is capped at that limit regardless.

Key dates

Worked example — Macca, sole-trader sparkie, $400k turnover

• Buys a $18,500 work ute in August 2026.
• Buys a $4,200 set of test gear in November 2026.
• Buys a $12,000 trailer in March 2027.
• All three are under $20k each and total purchase value doesn't matter — per-asset rule.

• At Macca's marginal rate (37% incl. Medicare on income above $135k), the deduction is worth ~$12,800 in tax saved that year.
• Without the IAWO, all three would depreciate over years — most tax benefit pushed into the future.

Worked example — Coffee Co, Pty Ltd café, $1.1M turnover

• Buys a $19,000 commercial coffee machine.
• Buys $19,000 of tables and chairs (one purchase, treated as one asset? No — each chair/table is a separate asset under the rules, all individually under $20k).
• Buys $17,000 of outdoor heaters.

• 25% company tax saving: $13,750.
• If the year flips to a loss after this deduction, Coffee Co can also carry back the loss to recover tax paid in the prior year (see the Loss Carry-Back article).

Worked example — BigBuild Pty Ltd, $25M turnover construction firm

• Turnover above $10M → NOT eligible for the IAWO.
• All asset purchases get depreciated over the usual effective life under Division 40.
• A $19,000 saw means ~$2,375 deduction year 1, not the full $19k.
• BigBuild is squeezed out by design — the measure is targeted at small businesses, not medium ones.

Myths vs reality

Myth 1: "Tradies can write off anything" — FALSE

Only depreciating business assets, each individually under $20k. Personal stuff is out. Buildings are out. Trading stock is out.

Myth 2: "It's only $20k a year total" — FALSE

It's $20k per asset, no annual cap. Buy ten qualifying assets in one year, claim all ten in full.

Myth 3: "Medium businesses get it too" — FALSE

Capped at $10M aggregated turnover. Bigger businesses use standard depreciation pools and Division 40 rules. This is a small-business measure, full stop.

Myth 4: "It's another temporary 12-month measure" — FALSE

Permanent. No sunset clause this time. Treasury and Tax Office can stop publishing the annual "is it extended?" guidance.

Myth 5: "Sole traders are excluded" — FALSE

Sole traders, partnerships, companies and trusts all qualify if aggregated turnover is ≤$10M. Entity structure doesn't matter — turnover does.

Myth 6: "The threshold should be $30k or more" — DEBATE

Industry groups have lobbied for higher. Treasury landed on $20k as the historical norm for "small tools and equipment" without bleeding the company tax base. Genuine policy choice, not a settled question.

Myth 7: "I can write off my $60k ute in full" — FALSE

The car limit (~$69,674 in 2025-26, indexed) caps depreciable car cost. But more importantly the $20k per-asset rule means a $60k ute doesn't qualify for instant write-off — only for normal depreciation up to the car limit.

Myth 8: "It applies to second-hand gear too" — TRUE

Both new and second-hand depreciating assets qualify, provided they meet all other rules (business use, under $20k, used by an eligible small business).

Myth 9: "Buying gear cuts my tax dollar-for-dollar" — FALSE

A $19k purchase doesn't save you $19k in tax. It saves you (deduction × marginal rate) in tax. At the 25% small-co rate, $19k of deduction = $4,750 of tax saved. The other $14,250 is still real cash out the door for a real asset.

Myth 10: "I should rush to buy gear in June 2026 to get the deal" — PARTIALLY

The current IAWO ($20k threshold) has been on a year-by-year extension. The permanent version starts 1 July 2026. Buying just before vs just after doesn't matter for eligibility — the threshold is the same. The only reason to rush is if the temporary version expires before the permanent one starts. Check ATO guidance close to 30 June 2026.

But what if...

...I'm a sole trader, do I really get this? Yes. Sole traders, partnerships, companies and trusts all qualify if aggregated turnover is under $10M. The ATO doesn't care about your entity structure — they care about turnover. The deduction reduces your taxable income, which reduces the tax you pay at your marginal rate (not the company rate).

...I'm a company on 25% — do I get the same benefit as a 30% company? A $19k deduction is worth $4,750 to a 25% small-co (turnover ≤$50M base-rate entity) and $5,700 to a 30% company. So a higher-rate company actually gets more cash back from the same purchase. But to be eligible at all, you need turnover ≤$10M — which means most eligible companies are on the 25% rate anyway.

...what if I buy the gear on 28 June 2026 — do I miss the permanent version? You'd fall under the current IAWO (also $20k, but year-by-year extended). The threshold is the same. The only thing you lose is the "permanent" certainty — and that only matters if you're planning purchases for future years. Check ATO guidance close to 30 June 2026 to be sure the bridging arrangement holds.

...what if I buy gear in late June 2026 but it doesn't arrive until July? The deduction year is when the asset is first used or installed ready for use, not when you paid. A ute that turns up in July sits in the 2026-27 year — which means it falls under the permanent version. Don't try to claim something that's still on a slow boat.

...will buying a $19k ute save me $19k in tax? No. It cuts your taxable income by $19k. Your tax saving = $19k × your marginal/company rate. So at the 25% small-co rate, you save $4,750 in tax. The other $14,250 is still cash you spent on the ute. Buy gear because you need it, not because the deduction sounds big.

...I'm a tradie thinking about buying tools just to lower my tax — smart move? Only if you actually need the tools. A $19k purchase saves $4,750-$7,000 in tax depending on your rate. You're still $12,000-$14,000 out of pocket on cash. Tax planning isn't a reason to spend money you wouldn't otherwise spend.

Where genuine debate lives

1. Whether $10M turnover is the right cap — many "small" trade and manufacturing businesses are well above this.
2. Whether $20k is too low in a post-inflation environment — a serviceable second-hand work ute often clears $20k now.
3. Whether the per-asset rule encourages atomising purchases to game the threshold — ATO will be watching.
4. Whether medium businesses ($10M-$50M turnover) should get a tapered version rather than a hard cliff.
5. Whether buildings and capital works should ever come into the regime (Treasury historically resistant).

A useful filter

When you see an IAWO claim:

1. Turnover under $10M? Yes → eligible. No → standard depreciation only.
2. Asset under $20k each? Yes → write off in full. No → depreciate normally.
3. Used in the business? Yes → in. Personal use → out (or apportion).
4. Permanent or temporary? This one is permanent from 1 July 2026.

Sources

• Theme 03 — Productivity §3.5
• Theme 04 — Tax Reform §4.4
• BP2 Measures Index
• Budget Paper 2
• Budget Paper 1 — Statement 4

Related

• Loss Carry-Back & Refundability
• $1k WFH Deduction
• R&D Tax Incentive for Startups
• Tax Cuts Package