Quick answer
With the instant asset write-off, an eligible small business can claim the cost of a qualifying asset in the same year it starts using it, or has it installed and ready to use, within the thresholds and dates the law sets. Financed assets can count when the business is the owner, as with a chattel mortgage, while leased assets are normally handled differently. The rules keep changing, so check the ATO's current position first.
Key points
- The law sets the eligibility tests, thresholds and dates, and they keep moving.
- Who owns the asset decides how chattel mortgages and leases are treated.
- The asset has to be in use, or installed and ready, within the year.
- A tax deduction is no substitute for healthy cash flow.
Checklist
- Current ATO threshold and eligibility checked
- Asset in use, or installed and ready, before the cut-off
- Finance structure confirmed with accountant
- Repayments affordable regardless of tax benefit
Each May and June the instant asset write-off is back in the headlines, and equipment dealers start urging businesses to buy before the cut-off. The concession can be worth having, and finance can make it easier to use. Yet the way the two fit together is widely misunderstood. Below is a plain-language overview; on your own numbers, your accountant has the last word.
The concession in brief
Normally a business claims the cost of equipment gradually, through depreciation, over several years. The instant asset write-off lets an eligible small business instead claim the business-use share of a qualifying asset’s cost in one year: the year the asset starts being used, or is installed and ready to use. Who is eligible, how high the cost threshold is and which dates apply are all set by law, and every one of them has changed repeatedly. Before you rely on it, read the ATO’s current instant asset write-off page.
Ownership links the write-off to finance
Because the write-off is a depreciation concession, it only works for assets the business holds. That puts the finance structure front and centre:
| Structure | Who owns the asset | Typical tax approach |
|---|---|---|
| Chattel mortgage | Your business | Depreciation (including write-off where eligible) and interest |
| Hire purchase | Generally treated as your business for tax | Similar to ownership in many cases |
| Finance lease | Financier | Lease payments |
| Operating lease | Financier | Lease payments |
That is why businesses wanting the write-off often pick a chattel mortgage. A lease is not a mistake; it simply falls under different tax treatment. Talk it through with your accountant before deciding.
Getting the timing right
As a general rule, the asset has to be in use, or installed and ready for use, inside the eligible period. A machine ordered in June but not delivered until August might miss the earlier year entirely. Allow for supplier lead times and make sure the finance settles early enough.
Cash flow comes first
A deduction lowers taxable income. It does not hand back the purchase price. If the repayments will strain the business, no tax saving will rescue the decision. Run the numbers through the repayment coverage calculator and be confident the asset will pay its way.
Mistakes we see often
- Relying on last year’s threshold.
- Treating a lease as if it qualified just like ownership.
- Buying gear the business has no real use for, just to get the deduction.
- Overlooking private use, which cuts the amount you can claim.
- Missing the deadline for having the asset in use or installed.
Buying before 30 June
If an end-of-year purchase is on the cards, start well ahead: get quotes, confirm eligibility with your accountant, settle on a finance structure and leave room for delivery and installation. Our EOFY finance planning guide sets out a timeline.
Second-hand gear
Used assets can qualify for the write-off if they meet the rules. Financing pre-owned equipment comes with its own checks, which we cover in financing used equipment.
An illustrative example
Picture a fictional Toowoomba landscaper planning to replace her ride-on mower in May. Her accountant confirms she qualifies under the rules in force and that the mower’s price sits under the threshold. She uses a chattel mortgage so the business owns it, has it delivered and working by mid-June, and files the invoice and finance contract for tax time. Even without the deduction, the repayments sit comfortably within her cash flow.
When the write-off does not apply
An asset that misses out, perhaps because it costs more than the threshold or the business is not eligible, can usually still be depreciated over its effective life or through the small business pool. The deduction is just spread across several years. That alone is rarely a reason to delay or cancel the purchase; let the asset’s value to the business drive the decision and treat tax as secondary.
Paperwork to keep
For each financed asset, hold on to the supplier invoice, proof of delivery or installation, the finance contract and a note of how much it is used for business. Your accountant needs them to make the claim, and they are your evidence if the ATO ever asks.
Balloon payments and the write-off
A balloon on a chattel mortgage does not normally alter the asset’s cost for depreciation, because the business owns the whole asset from day one. What it alters is cash flow: smaller repayments now, a lump sum at the end. Plan for that final payment, and do not let an immediate deduction tempt you into a balloon bigger than the asset will be worth. Our guide to balloon payments shows how to size one sensibly.
Ready to finance equipment?
If you are lining up an equipment purchase and want finance that works with your tax planning, make one enquiry. Your first enquiry involves no credit check, a real person reads it and your details go to one lending partner, not a list. Tell us the asset, its price and your timing in your enquiry, and confirm the tax side with your accountant.
Frequently asked questions
Can I claim the instant asset write-off on financed equipment?
Usually, provided your business owns the asset and satisfies the eligibility rules, which is the case under a chattel mortgage. A leased asset belongs to the financier and is normally treated differently.
What is the current threshold?
Parliament sets the thresholds and eligible periods, and they have been changed many times. The ATO's instant asset write-off page always has the latest figures.
Does the asset need to be paid off to claim it?
In general, no. What counts is ownership and having the asset in use, or installed and ready, within the period, not whether the finance has been repaid. Check with your accountant.
Should I buy equipment before 30 June just for the deduction?
Only if the business genuinely needs it. The deduction lowers the tax on money you spend; it does not make the purchase free.
Does the write-off apply to used equipment?
It can. Both new and second-hand assets may qualify if they meet the rules. Check the ATO guidance for the exclusions.
What about GST on the purchase?
A GST-registered business that owns the asset may be entitled to claim GST credits under the normal rules. Your accountant can confirm.
Can a lease be better for tax?
Lease payments may be deductible as you make them. Whether leasing or borrowing comes out ahead depends on the business, so ask your accountant.
Can I claim the write-off and GST credits on the same asset?
In many cases, yes, because they work under separate rules: the GST credit is claimed on your BAS and the deduction in your income tax return. Your accountant can confirm the amounts.
Sources and further reading
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