A Decade of Threshold Changes: From $1,000 to Unlimited

Australia's instant asset write-off has undergone more changes in the past decade than almost any other small business tax provision. When the scheme was introduced for small businesses in 2012, the threshold was just $1,000. It rose to $6,500 in 2013, then dropped back to $1,000 in 2014. From 2015 onward, the ATO progressively raised it — to $20,000, then $25,000 in 2019, then $30,000, and then $150,000 during the COVID-19 economic response in 2020. The Temporary Full Expensing (TFE) measure, announced in the 2020–21 Federal Budget, removed the threshold entirely for eligible businesses with aggregated annual turnover under $5 billion, allowing unlimited-cost assets to be fully expensed. TFE ended on June 30, 2023, with the government reverting to a $20,000 threshold for small businesses (under $10 million turnover) from July 1, 2023 through June 30, 2025.

Each threshold change requires businesses to verify eligibility for the specific income year in which the asset was first used or installed ready for use — the threshold applicable at that date governs the write-off, not the threshold current at the time of purchase or payment.

Eligibility Rules: Turnover Limits and Excluded Assets

Eligibility for the instant asset write-off depends on the business's aggregated turnover for the income year. For the 2023–24 and 2024–25 income years under the current $20,000 threshold, businesses must have an aggregated turnover of less than $10 million. Aggregated turnover includes the turnover of any connected or affiliated entities, not just the taxpayer's own revenue — a common trap for businesses with associated companies or family trusts. Assets excluded from the write-off include: assets used to earn rental income from a residential property, horticultural plants (which use a separate rules set), capital works (buildings and structural improvements, which must use the Division 43 write-off), and assets not primarily used in Australia for a taxable purpose.

The Small Business Pool as a Fallback Strategy

When an asset's cost exceeds the instant asset write-off threshold — or when a business's turnover exceeds the eligibility limit — assets can enter the ATO's small business depreciation pool rather than being written off immediately. The small business pool uses a 15% deduction rate in the year of entry (regardless of when during the year the asset was purchased) and a 30% diminishing value rate in subsequent years. A $30,000 asset entering the pool in 2024–25 under a $20,000 threshold generates a $4,500 deduction in year one (15% of $30,000) rather than the full $20,000 write-off the business might prefer. The pool simplifies record-keeping by blending all pooled assets together, but removes the ability to track individual assets for disposal gains and losses — a trade-off that suits businesses with high asset turnover but frustrates those managing expensive long-life equipment.