Can a trade business immediately deduct tools this financial year?

Check eligibility before claiming

The ATO says a small business must apply the simplified depreciation rules to use the instant asset write-off, and it cannot be used for excluded assets. It applies to new and second-hand assets, and to multiple assets if each one's cost is under the limit. The year of the claim depends on when the asset was first used or installed ready for use, not just when it was bought or invoiced.

Eligibility depends on your aggregated turnover, which includes affiliates and connected entities, so check that figure first. If the cost is the same as or more than the limit, the ATO says the asset goes into the small business pool instead.

Sources[1]

The $20,000 limit in 2026-27

The ATO table shows $20,000 for businesses under $10 million aggregated turnover for assets first used or installed ready for use on or after 1 July 2023. Schedule 2 of the Treasury Laws Amendment (Tax Reform No. 2) Act 2026, assented on 26 August 2026, replaces the $1,000 figure in the small business depreciation provisions with $20,000. It applies to a depreciating asset first used, or installed ready for use, for a taxable purpose on or after 1 July 2026.

The change makes the $20,000 threshold permanent from 1 July 2026. It does not create a new 30 June 2027 expiry for that threshold; continue to check the current rules before each year's claim.

Sources[1][2]

GST, trade-ins and business use

If you are registered for GST and can claim a full GST credit, the ATO says to exclude the GST when working out the asset's cost. If you can claim only part of the credit, the cost is reduced only by the part you can claim. If you are not registered, the GST is part of the cost.

For a trade-in, the ATO says to use the purchase price before any trade-in credit. For private use, you can deduct only the taxable purpose portion, but the entire cost must still be under the limit.

Sources[1]

Four fictional examples

These are our examples, assuming the business is eligible and the assets are first used in 2026-27. The first assumes a plumber registered for GST who claims the full credit.

Sources[1]

What the write-off does not do

A deduction reduces taxable income. It is not a refund of the purchase price, and an invoice date does not make an asset eligible. Cars have their own limit and are not covered here. Ask your accountant or the ATO to confirm your situation.

Sources[1]

Common questions

What is the $20,000 instant asset write-off and how does it work?

It lets an eligible small business using simplified depreciation immediately deduct the business portion of an asset whose whole cost is under the limit, in the year it is first used or installed ready for use. The ATO table shows $20,000 for assets first used from 1 July 2023, and an asset costing $20,000 or more goes to the small business pool.[1]

How much money in tools can you write-off?

The write-off applies per eligible asset. You can claim the business portion of several assets if each meets the full-cost limit and other eligibility rules. Assess each item separately, including GST credits, private use and when it was first used or installed ready.[1]