Taking advantage of the instant asset write-off
If your business is planning to upgrade equipment this financial year, the weeks before 30 June may be worth a closer look.
Eligible small businesses can currently access the $20,000 instant asset write-off. At first glance, $20,000 may not sound especially generous. For many businesses, it will not cover a major vehicle or large piece of plant. However, the current rules can still be useful where a business is purchasing smaller equipment, replacing several lower value assets, or trying to balance tax timing with cash flow management.
What the instant asset write-off means in practice
For eligible small businesses with aggregated turnover under $10 million, the write-off applies to depreciating assets costing less than $20,000 on a per asset basis, provided each asset is first used or installed ready for use between 1 July 2025 and 30 June 2026.
Assets at or above $20,000 generally go into the small business depreciation pool instead. This means the write-off is most relevant for tools, office equipment, selected technology, smaller machinery and similar purchases.
Why finance can make sense
Many businesses prefer not to tie up working capital in equipment, even where the asset is clearly needed.
Equipment finance can spread the cost over time. This may help preserve cash for day-to-day operations while still allowing the business to move ahead with upgrades.
That can be particularly relevant when a business is replacing several assets at once. Because the instant asset write-off applies per asset rather than as one single business cap, a business buying multiple eligible items may have more flexibility than the headline threshold suggests.
Finance structures to consider
Chattel mortgage
A chattel mortgage is often used where the business seeks ownership from the start and the lender takes security over the asset.
It may suit businesses purchasing vehicles, machinery or equipment they expect to keep long term, although the tax and GST treatment should always be confirmed with the business’s accountant.
Finance lease
A finance lease may appeal where the focus is on using the asset rather than owning it straight away. Depending on the structure, this can support cash flow and flexibility, particularly for higher-value equipment or assets that may be upgraded later.
Operating lease or rental
An operating lease or rental arrangement may be worth considering where the business expects shorter-term use, regular upgrades or a return of asset strategy at the end of term.
This can be relevant for some technology assets, vehicles and specialist equipment.
Multi-asset funding
Where a business needs several lower value assets, a multi-asset facility may help streamline the funding process.
This can be especially useful approaching EOFY, when businesses are trying to coordinate supplier lead times, settlement and installation without turning the office into a full-time paperwork festival.
Questions business owners should ask now
Before committing to any purchase, business owners should ask:
- Does the business actually need the asset now or is the purchase being driven only by tax timing?
- Is the asset cost below the current threshold, and is the business eligible under the turnover rules?
- What finance structure best matches the intended ownership, cash flow and replacement cycle?
- Has the accountant confirmed the expected tax and GST treatment for the business’s circumstances?
A practical message for EOFY
The best EOFY equipment decisions are usually the boringly sensible ones.
Businesses tend to obtain the strongest outcome when they finance assets they already need, understand the deadline and choose a structure that supports both operations and tax planning.
Get in touch today if you would like to discuss any asset and equipment funding scenarios.
Leave a Comment