The $20,000 Instant Asset Write-Off Is Going Permanent: How to Maximise It with Equipment Finance

For over a decade, small business owners have played the same anxious guessing game every June: would the instant asset write-off survive another Budget, or would it quietly revert to a much lower threshold? The 2026–27 Federal Budget was supposed to end that guessing game for good — but there's a timing detail that matters right now, in the middle of 2026, that's worth understanding before you finance your next piece of equipment.

Here's what's actually changed, exactly where the legislation stands today, how the write-off applies if you finance equipment rather than paying cash, and a full worked example showing what the deduction is worth in real dollars.

Why 2026–27 is the ideal time to finance business equipment

On 12 May 2026, as part of the 2026–27 Budget, the Government announced the $20,000 instant asset write-off would become a permanent, ongoing feature of the tax system from 1 July 2026 — rather than something Parliament has to renew year after year. For small businesses with an aggregated turnover under $10 million, that means being able to immediately deduct the full cost of eligible assets under $20,000, indefinitely, without an annual sunset clause to watch for.

Here's the precise detail. This measure sits in Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026. According to Parliament's own record, the Bill was referred to the Senate Economics Legislation Committee on 25 June 2026, with submissions closing 16 July 2026 and a committee report due 13 August 2026 — meaning it cannot realistically become law before mid-August 2026 at the very earliest, once it clears committee and both houses. A companion measure from the same Budget, the Treasury Laws Amendment (Tax Reform No. 1) Bill 2026, covering CGT and negative gearing changes, already passed and received Royal Assent on 26 June 2026 — so the broader reform package is genuinely moving, but the write-off's own Schedule is a separate Bill that hasn't caught up yet.

What that means practically, right now: the $20,000 threshold was already locked in as law for any asset first used or installed ready for use by 30 June 2026 — that part isn't in question. But for assets first used from 1 July 2026 onward, the write-off amount depends on whether this Bill passes. If it hasn't passed by the time you're reading this, the standing default threshold is $1,000, not $20,000, until it does. Check ato.gov.au or speak to your accountant for the current status before finalising a purchase decision based on the $20,000 figure.

None of that changes the practical case for financing equipment now rather than later: whichever threshold ultimately applies, bringing a purchase forward and getting the asset operational sooner means claiming whatever deduction is available sooner, instead of losing time while you wait and see.

What the ,000 instant asset write-off actually means (and what it doesn't)

Eligible small businesses can immediately deduct the full cost of a depreciating asset costing less than $20,000, in the income year it's first used or installed ready for use — instead of depreciating it over several years. The threshold applies per asset, not per business, so multiple qualifying purchases in the same year can each be written off in full.

Two things it does not mean:

• It doesn't make the asset free. You still pay for it in full — the write-off reduces your taxable income, not your purchase price.
• It applies to the asset's cost, not the loan amount. This is the point that trips up most business owners financing equipment: the $20,000 threshold tests what the asset cost is, not how much you borrowed or over what term you're repaying it. An $18,000 van financed over five years is tested against its $18,000 cost, full stop.

Assets costing $20,000 or more are instead added to the small business depreciation pool, deducted at 15% in the first year and 30% each year after.

That's the write-off itself. Here's how it actually works once finance enters the picture.

How the write-off applies to financed equipment — the chattel mortgage mechanism

This is the part most competing guides skip entirely, and it's the single biggest misconception we hear from clients: the assumption that the write-off only applies if you pay cash.

With a chattel mortgage, the business takes ownership of the asset from the date of purchase. This means the full asset cost (up to $20,000) can be claimed as an immediate deduction in the year the asset is first used — even though the loan repayments are spread over several years. The GST on the purchase is also claimed in the BAS for the purchase quarter.

The ATO's test is about who owns and uses the asset, not how it was paid for. A chattel mortgage transfers legal ownership to your business at settlement; the lender simply registers a security interest over the asset until the loan is repaid. That structure satisfies the ownership test in exactly the same way a cash purchase does.

Finance lease vs chattel mortgage: which enables the write-off?

The two most common equipment finance structures treat ownership — and therefore the write-off — very differently.

Chattel mortgage. The business owns the asset immediately. The full cost is eligible for the instant asset write-off (or depreciation pool, if $20,000 or more), while loan repayments continue separately over the finance term.

Finance lease. The financier retains legal ownership of the asset for the lease term. Instead of an asset write-off, the business claims the lease payments themselves as a deductible expense, spread across the term.

If claiming the instant asset write-off is your priority, a chattel mortgage is the structure that delivers it. Finance lease can still suit businesses prioritising lower repayments or off-balance-sheet treatment — it's a legitimate structure, just a different tax outcome. For a fuller comparison across every available structure, see our guide to which equipment finance structure is right for your firm.

Who should use a chattel mortgage?

A chattel mortgage suits any business planning to own equipment outright and use it for its full working life, rather than upgrade it or hand it back at the end of a term. In practice, that describes most asset-heavy trades and industries, including:

• Tradies and contractors. Tools, vehicles, and equipment bought to keep working, not to trade in every few years — ownership from day one means the asset, and the write-off, belong to the business regardless of the loan term.
• Transport and logistics businesses. Trucks, trailers, and fleet vehicles, where the write-off or depreciation pool directly affects the real cost of running each vehicle.
• Construction businesses. Earthmoving equipment and machinery that represent a genuine long-term capital investment rather than short-term hire.
• Medical and allied health practices. Diagnostic equipment, dental chairs, and practice fit-out assets that are core to running the practice rather than incidental to it.
• Manufacturers. Production machinery and equipment, where the immediate deduction — or accelerated depreciation for larger assets — has a direct effect on cash flow in the year of purchase.
• Hospitality businesses. Kitchen equipment, coffee machines, and fit-out assets that need replacing on a working timeline, not a lease-return schedule.

The common thread across all six: businesses that intend to keep the asset, rather than return or upgrade it at the end of a finance term, get more value from ownership-from-day-one than from a finance lease's off-balance-sheet treatment.

Worked example: the full tax calculation on a financed ,000 van

Numbers make this concrete. Say a business finances an $18,000 (GST-exclusive) van via chattel mortgage, and pays company tax at the 25% small business rate.

(This example uses the $20,000 threshold — accurate for any asset already used or installed, ready for use by 30 June 2026, and the figure to plan against once the permanent extension passes for anything after that date.)

Income tax deduction: the full $18,000 cost is claimed as an immediate deduction in the year the van is first used. At a 25% tax rate, that's a $4,500 reduction in tax payable in year one — regardless of whether the loan is repaid over three years or five.

GST: if the business is GST-registered, the GST component (roughly $1,800 on an $18,000 GST-exclusive cost) is claimed as an input tax credit on the BAS for the quarter of purchase — separate from, and in addition to, the income tax deduction.

The loan itself: the chattel mortgage repayments continue on their own schedule after the deduction is claimed. The tax benefit lands in year one; the cash repayments are spread over the finance term. These are two separate things, and conflating them is the most common error we see business owners make when estimating the benefit.

See what your specific purchase would be worth.

Broc Finance structures equipment finance for maximum tax efficiency — chattel mortgage, finance lease, or hire purchase across 150+ lenders. Get your equipment finance assessment today. Apply for equipment finance with Broc Finance.

Which assets qualify and which don't — the car limit explained

The write-off covers a broad range of business assets: tools, technology, machinery, office equipment, and vehicles, whether new or second-hand.

Vehicles need a closer look. Passenger cars — designed to carry fewer than nine passengers — are capped at the car limit for the relevant income year, regardless of the instant asset write-off threshold. For the 2025–26 income year, that limit is $69,674. The ATO publishes an indexed figure annually, so confirm the current year's limit before finalising a purchase.

Commercial vehicles with a carrying capacity of more than one tonne — utes, vans, and trucks like the example above — generally aren't subject to the car limit at all. That's why our $18,000 van example above qualifies for the full instant asset write-off treatment rather than being tested against the car limit.

Electric vehicles. An electric vehicle is tested against exactly the same rules as any other vehicle: a passenger EV is capped at the car limit, and a commercial EV ute or van over one tonne carrying capacity is treated as a commercial vehicle with no car limit applied. Separately, eligible electric cars under the luxury car tax threshold for fuel-efficient vehicles can qualify for an FBT exemption — a different concession again, running on its own threshold and mechanism rather than the instant asset write-off. Worth raising both with your accountant, since they can stack.

Utes vs. passenger SUVs — how to tell which rules apply. The distinction that matters is carrying capacity, not body style or size. A dual-cab ute with more than one tonne of payload is treated as a commercial vehicle and sits outside the car limit entirely. A passenger SUV — even a large one — is still classified as a car if it's principally designed to carry passengers, so it's capped at the car limit regardless of how big it looks on the lot. Check the specific model's payload rating rather than assuming from appearance.

Luxury car tax and the car limit are two separate thresholds. Luxury car tax applies at the point of sale if a vehicle's price exceeds the LCT threshold — a different figure again from the car limit used for depreciation and the instant asset write-off. A vehicle can sit above one threshold without triggering the other. Both are indexed annually by the ATO, so confirm the current figures for both before finalising a vehicle purchase, not just the one you've already heard about.

How to make the most of the write-off, whichever threshold applies

The test that actually matters, every year, is "first used, or installed ready for use" — not the invoice date or the order date. An asset sitting in a delivery queue at financial year-end doesn't count for that year, regardless of when you paid for it. That rule doesn't change based on how the Bill lands; it's worth building into your purchasing process permanently, not just remembering each June.

Right now, the practical move is to watch the calendar on the legislation itself. The Senate committee reports on 13 August 2026 — the next real checkpoint for knowing whether the $20,000 threshold is locked in or the $1,000 default applies. If you can reasonably time a purchase around that date, do so with your accountant's input.

That's exactly where financing has an edge over saving up to pay cash: a chattel mortgage application through Broc Finance's panel can typically be approved and settled within 24–48 hours, which matters when the gap between claiming a deduction this year or next comes down to getting equipment operational before a cutoff. Keep clear records regardless of structure — the tax invoice, the finance contract, and the date the asset was first used or ready for use.

Common mistakes businesses make

Most of what goes wrong with equipment finance and the write-off comes down to a handful of repeated mistakes, not genuine grey areas in the rules.

Assuming finance means they can't claim the write-off. This is the misconception the chattel mortgage mechanism above exists to correct — ownership, not payment method, is what the ATO actually tests. A financed asset qualifies on exactly the same basis as a cash purchase.

Ordering equipment before EOFY but not having it installed and ready for use. The deduction follows the "first used, or installed ready for use" date, not the order or invoice date. An asset still in transit or awaiting installation at 30 June doesn't count for that financial year, no matter when it was paid for.

Choosing the wrong finance structure. A finance lease and a chattel mortgage solve different problems — the first suits businesses prioritising lower repayments or off-balance-sheet treatment, the second suits businesses that want the write-off. Picking one without checking which outcome you actually need is the most common structural error we see. Our guide to which equipment finance structure is right for your firm breaks down the full trade-off before you commit.

Buying solely for the tax deduction instead of business need. A deduction only has value if the underlying purchase made sense anyway — the write-off reduces the after-tax cost of equipment you needed, it doesn't create a reason to buy equipment you don't.

Before you finance equipment — a quick checklist

Before you sign anything, run through this:

• Confirm business use. The asset needs a genuine business purpose — personal-use equipment run through the business doesn't qualify for the deduction.
• Check your GST registration status. GST-registered businesses claim the input tax credit separately from the income tax deduction; unregistered businesses work from the GST-inclusive cost instead.
• Confirm the asset will be installed and ready for use in the year you want to claim it. Not just ordered or invoiced — actually in service.
• Speak with your accountant. Confirm the current threshold, your eligibility, and how the deduction interacts with your specific tax position, before you commit to a number.
• Choose the right finance structure. Chattel mortgage for the write-off, finance lease for lower repayments or off-balance-sheet treatment — get this decision right before settlement, since switching structures afterward isn't simple.

How Broc Finance structures equipment finance for maximum tax efficiency

Chattel mortgage, finance lease, and hire purchase all solve different problems, and the right one depends on whether your priority is the immediate deduction, lower monthly repayments, or keeping the asset off your balance sheet. We assess that against your actual tax position — not just your borrowing capacity — before recommending a structure, then match it against our panel of 150+ lenders to find competitive terms for whichever structure fits.

If you're planning an equipment purchase this financial year, get in touch with our team for equipment finance from Broc Finance before you commit to a structure — the tax outcome is decided at that point, not afterwards.

Frequently asked questions

Does the instant asset write-off apply to financed equipment?

Yes. Equipment financed through a chattel mortgage qualifies on the same basis as a cash purchase, because the business takes legal ownership of the asset from the date of purchase. The full cost under the threshold can be claimed in the year the asset is first used, regardless of the loan term.

How does the $20,000 write-off work with a chattel mortgage?

With a chattel mortgage, the business owns the asset from day one, so the full cost (up to $20,000) can be claimed as an immediate deduction in the year it's first used, even though loan repayments continue over several years. GST is claimed separately on the BAS for the purchase quarter.

Can I claim the instant asset write-off on a business vehicle?

Yes, but the rules differ by vehicle type. Commercial vehicles over one tonne carrying capacity (utes, vans, trucks) can generally be written off in full under the threshold. Passenger cars are capped at the car limit for the income year, regardless of the write-off threshold.

What is the car cost limit for the instant asset write-off in 2026?

For the 2025–26 income year, the car limit is $69,674. This applies to passenger vehicles designed to carry fewer than nine passengers. The ATO indexes this limit annually, so confirm the current year's figure before finalising a vehicle purchase.

Is the instant asset write-off permanent now?

The Government announced a permanent extension from 1 July 2026 in the 2026–27 Budget, contained in Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026. As at the most recent update, the Bill was before the Senate Economics Legislation Committee, with a report due 13 August 2026 — so it isn't law yet, and the current default threshold is $1,000 until it passes. Check ato.gov.au for the latest status.

Plan the purchase, then confirm the detail

The mechanics don't change based on how the legislation lands: chattel mortgage financing gets you ownership from day one, which is what makes the instant asset write-off available to financed equipment in the first place. What's still settling is the exact threshold you'll be planning against from 1 July 2026 onward — worth a five-minute check with the ATO or your accountant before you commit to a number.

The $20,000 instant asset write-off is on track to become a permanent fixture. Finance your equipment through Broc Finance and be ready to claim the full benefit as soon as it lands. Apply for equipment finance with Broc Finance.