For years, small businesses waited until the May Budget to find out whether the instant asset write-off would be extended for another twelve months. That is over. The Treasury Laws Amendment (Tax Reform No. 2) Act 2026, passed in August 2026, makes the $20,000 instant asset write-off permanent from 1 July 2026 and brings back loss carry-back for companies.
Both are worth understanding properly, because both are easy to overestimate.
The two measures at a glance
- Instant asset write-off: an immediate deduction for each asset costing less than $20,000, for businesses with turnover under $10 million, permanent from 1 July 2026
- Loss carry-back: a company with a tax loss in 2026–27 or later can claim a refund of tax paid in either of the two previous years
- Without the new Act, the write-off threshold would have fallen back to $1,000 on 1 July 2026
Instant asset write-off rules for 2026–27
- Your business must have an aggregated turnover of less than $10 million and use the simplified depreciation rules
- Each asset must cost less than $20,000
- The limit applies per asset, so several assets can be written off in the same year
- The asset must be first used, or installed ready for use, in the year you claim it
- New and second-hand assets both qualify
- Only the business-use portion is deductible
- If you are registered for GST, the $20,000 test is applied to the GST-exclusive cost
Assets costing $20,000 or more go into the small business pool and are depreciated at 15% in the first year and 30% each year after. If the pool balance is below $20,000 at year end, the whole balance is written off. The rule that locks a business out of simplified depreciation for five years after opting out remains suspended until 30 June 2027.
Instant asset write-off traps
It is a timing benefit, not extra money. A company on the 25% rate that buys an $18,000 machine saves $4,500 in tax. It would have saved the same $4,500 over several years through ordinary depreciation. The write-off brings the deduction forward. The business is still $13,500 out of pocket.
A deposit is not enough. The asset has to be delivered and installed ready for use by 30 June. Ordering it, or paying for it, does not count.
$20,000 means less than $20,000. An asset costing exactly $20,000 goes into the pool.
Private use reduces the claim. A $15,000 ute used 70% for business gives a $10,500 deduction, although the full cost is what is tested against the threshold.
Selling the asset later creates income. Once an asset has been written off, whatever you sell it for is assessable.
Leased assets do not qualify. You need to be the owner, or the buyer under a hire purchase or chattel mortgage. Under a lease, the lessor claims the depreciation and you claim the lease payments.
Passenger cars over the car limit. For 2026–27 the car limit is $69,883. A car under $20,000 can be written off, but a more expensive car goes into the pool with its cost capped at that limit.
Loss carry-back: how it works
Loss carry-back lets a company that paid tax in a good year get some of it back when a bad year follows, instead of carrying the loss forward and waiting for profits to return.
To be eligible, the company must:
- Be a corporate tax entity with aggregated turnover under $1 billion
- Have a tax loss in an income year starting on or after 1 July 2026
- Have paid income tax in either or both of the two previous income years
- Have a surplus in its franking account at the end of the loss year
- Have lodged its tax returns for the current year and the previous five years
The company chooses to carry the loss back in its tax return and receives a refundable tax offset. The offset is capped by the tax paid in the earlier years and by the franking account balance. Only revenue losses count. Capital losses cannot be carried back.
For example, a company made a taxable profit of $80,000 in 2025–26 and paid $20,000 in tax at 25%. In 2026–27 it makes a tax loss of $40,000. It can carry the loss back and claim a refundable offset of $10,000 in its 2026–27 return, provided its franking account balance is at least that much.
What loss carry-back costs you
- Franking credits. The refund is limited by, and uses up, franking account balance. If you plan to pay franked dividends, including to clear a shareholder loan, check what will be left.
- The loss itself. A loss carried back is no longer available to carry forward. If you expect to move to a higher tax rate, carrying forward may be worth more.
- It is for companies only. Sole traders, partnerships and trusts cannot use it.
How the two measures work together
A company in a lean year that buys equipment it needs gets an immediate deduction, which increases the loss, which can be carried back for a refund of tax paid in a stronger year. That is a real cash flow benefit, but only if the business needs the asset. Spending a dollar to save 25 cents is not a tax strategy.
What to do before 30 June
- Check your aggregated turnover, including connected entities and affiliates, against the $10 million threshold.
- Plan purchases around delivery and installation dates, not order dates.
- Price assets on a GST-exclusive basis if you are registered.
- If your company is heading for a loss, check the tax paid in the last two years and the franking account balance before year end.
- Keep invoices and evidence of when each asset was first used.
Common questions
Can sole traders, trusts and companies all use the instant asset write-off?
Yes. It is available to any small business entity with aggregated turnover under $10 million, whatever the structure.
Can I write off more than one asset?
Yes. The $20,000 threshold applies to each asset separately.
Does the instant asset write-off apply to second-hand assets?
Yes, provided the asset costs less than $20,000 and is first used or installed ready for use in your business in the year you claim.
Which years can a 2026–27 loss be carried back to?
The two previous income years: 2024–25 and 2025–26.
Need a hand with this?
If you are planning equipment purchases, or your company is facing its first loss in a while, the timing decisions are made before 30 June, not when the return is prepared. We can check your eligibility, model the write-off against pooling and work out whether carrying a loss back or forward leaves you better off. We are Chartered Accountants and registered tax agents in Cairnlea, in Melbourne’s west.
Related reading
- The 30 June tax planning checklist
- Division 7A pitfalls: taking money out of your own company
- Car and travel claims: 88 cents a kilometre, and the trips you can’t claim
- FBT traps that catch small employers
- Our full range of services
Sources
- ATO – $20,000 instant asset write-off
- ATO – Tax reform: tax loss carry back
- ATO – Tax loss carry back law now passed
- ATO – Car thresholds from 1 July
This article is general information only and does not take your personal circumstances into account. It reflects the law and announced measures as at October 2026. Measures described as draft or proposed may change before they are enacted. Speak to us before acting on anything you read here.
