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Small businesses are set to gain ongoing access to the $20,000 instant asset write-off, after the Federal Government confirmed in the 2026-27 Budget that the measure will become permanent from 1 July 2026.
The announcement was made on 12 May 2026 as part of the Treasurer's Budget speech, and is intended to improve cashflow and reduce compliance costs for small businesses. The Australian Taxation Office updated its public guidance on the measure on 18 May 2026, although it has confirmed that the change is not yet law.
Under the measure, small businesses with an aggregated annual turnover of less than $10 million will be able to deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used, or installed ready for use, in an income year. The deduction also extends to second-element costs incurred on assets that were previously written off under the simplified depreciation rules, provided the second-element amount is less than $20,000 and is the first such amount incurred after the asset was originally written off.
The $20,000 limit applies on a per-asset basis. That means a business can write off multiple eligible assets within the same income year, as long as each asset falls below the threshold.
Assets valued at $20,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated at 15 per cent in the first income year and 30 per cent each income year after that. Pool balances under $20,000 at the end of the income year can also be written off in full.
The provisions that prevent small businesses from re-entering the simplified depreciation regime for five years after opting out will continue to be suspended until 30 June 2027.
The instant asset write-off is widely used by small businesses to manage the cost of equipment, tools, technology and vehicles, and is particularly relevant for SMEs that scale capacity in response to new government contracts. Making the measure permanent removes the year-on-year uncertainty that has previously made longer-term capital planning difficult.
For suppliers preparing to bid in the 2026-27 government tender cycle, the change offers two practical benefits. The first is greater certainty when forecasting the cost of equipment needed to deliver contracted work. The second is a simpler tax position at the end of each income year, which reduces the administrative burden on small businesses that may be juggling delivery of multiple contracts.
The Australian Taxation Office has been clear that the measure is not yet law. The Government previously extended the $20,000 instant asset write-off limit for the period 1 July 2025 to 30 June 2026 through the Treasury Laws Amendment (Strengthening Financial Systems and Other Measures) Act 2025, which is in force. Making the measure permanent from 1 July 2026 will require separate legislation, and small businesses should plan accordingly until that legislation is passed.
There are three practical steps SMEs can take ahead of 1 July 2026:
For businesses pursuing government contracts, the change is a useful planning input for the new financial year, alongside the other key procurement and policy changes taking effect from 1 July 2026.
Australian Tenders monitors procurement opportunities from government agencies across Australia, including federal, state and territory departments, authorities and government-owned organisations. By bringing opportunities together in one place, we help businesses navigate the procurement landscape, identify relevant tenders and stay informed about the policies and spending priorities shaping future contract opportunities.