The instant asset write-off for vehicles lets eligible Australian small businesses immediately deduct the cost of a vehicle in the year it is first used — rather than depreciating it over several years. For the 2025–26 financial year, the threshold is $20,000 per asset, and the rules around passenger vehicles have specific caps that every business owner should understand.
This guide explains how the instant asset write-off applies to cars, utes, vans, and other business vehicles, including the interaction with the ATO car cost limit and GST credits.
How the instant asset write-off works
The instant asset write-off allows small businesses with an aggregated turnover of less than $10 million to immediately deduct the full cost of eligible depreciating assets.
Key rules for 2025–26:
- The asset must cost less than $20,000 (GST-exclusive if you are registered for GST)
- The asset must be first used or installed ready for use between 1 July 2025 and 30 June 2026
- The $20,000 threshold applies per asset, not per business — you can write off multiple assets
- Both new and second-hand assets are eligible
- The asset must be used for a business purpose (or have a reasonable expectation of business use)
For vehicles, there is an additional consideration: the ATO car cost limit.
The car cost limit and how it affects the write-off
The ATO imposes a car cost limit on passenger vehicles — the maximum amount you can use for depreciation and write-off purposes. For 2025–26, the car cost limit is $69,674.
What this means in practice:
If you buy a passenger car for $45,000 (GST-exclusive) and it is under the $20,000 instant write-off threshold… wait — $45,000 exceeds $20,000, so it does not qualify for the instant write-off.
For the instant asset write-off to apply to a passenger car, the GST-exclusive cost must be under $20,000. This limits the benefit to lower-value vehicles. A second-hand hatchback at $18,000 qualifies. A new SUV at $50,000 does not.
Cars costing $20,000 or more are placed into the small business depreciation pool and depreciated at 15% in the first year and 30% in subsequent years.
Utes, vans, and commercial vehicles: different rules
The car cost limit only applies to vehicles classified as “cars” under the ATO definition — motor vehicles designed to carry fewer than nine passengers and a load of less than one tonne.
Utes and vans with a GVM over one tonne are not “cars” for this purpose. This means:
- The car cost limit does not apply
- An eligible ute costing $19,500 (under $20,000) qualifies for the instant write-off at full value
- Utes and vans over $20,000 are placed in the depreciation pool, but the $69,674 cap does not restrict the depreciable amount
This distinction is critical for tradies, construction businesses, and delivery operators. A $60,000 dual-cab ute is depreciated on its full cost — not capped at $69,674 like a passenger car would be.
For more on tradie vehicle rules, see Tradesperson Vehicle Deductions.
Eligible business structures
The instant asset write-off is available to:
- Sole traders with aggregated turnover under $10 million
- Partnerships meeting the turnover threshold
- Companies (Pty Ltd) meeting the turnover threshold
- Trusts meeting the turnover threshold
The aggregated turnover includes the turnover of any connected entities or affiliates — not just your own business.
How to claim the write-off
Step 1: Purchase and install the vehicle. The vehicle must be first used or installed ready for use before 30 June 2026. Ordering a car in June but not receiving it until July means you miss the 2025–26 window.
Step 2: Determine the deductible amount. If the asset costs less than $20,000 (GST-exclusive for GST-registered businesses), deduct the full business-use portion immediately. If you use the vehicle 80% for business, your deduction is 80% of the cost.
Step 3: Claim on your tax return. Report the deduction in the depreciation section of your business tax return. The ATO’s simplified depreciation rules apply — you do not need to calculate the effective life or choose a depreciation method for assets under the threshold.
Step 4: Claim GST credits on your BAS. If you are GST-registered, claim the GST credit on the vehicle purchase in your BAS for the relevant period. The GST credit is subject to the car cost limit for passenger vehicles ($6,334 max).
For more on GST and vehicle purchases, see GST Car Expenses Business.
What happens to assets over $20,000?
Assets that cost $20,000 or more (but are still used for business) are added to the small business depreciation pool:
- 15% deduction in the first income year
- 30% deduction in each subsequent year
- If the pool balance falls below $20,000 at the end of the 2025–26 income year, you can write off the entire remaining balance
This pooling arrangement simplifies depreciation for small businesses. Instead of tracking individual assets, all pooled assets are depreciated together at the same rate.
The $20,000 threshold: past and future
The $20,000 instant asset write-off threshold has been extended year by year:
| Financial Year | Threshold |
|---|---|
| 2023–24 | $20,000 |
| 2024–25 | $20,000 |
| 2025–26 | $20,000 |
| 2026–27 onwards | $1,000 (unless extended) |
The legislated default threshold from 1 July 2026 drops to just $1,000. Without further government action, the generous $20,000 threshold ends after 30 June 2026. If you are planning a vehicle purchase, acting before this date is important.
Improvements to existing assets
If you previously claimed the instant asset write-off on a vehicle and later make an improvement (e.g., fitting a tray, bull bar, or toolbox), the improvement cost may also qualify for the instant write-off — provided it is under $20,000 and incurred between 1 July 2025 and 30 June 2026.
This applies per improvement, not per original asset. Multiple improvements under $20,000 each can all be written off immediately.
Track your business use percentage
The instant asset write-off only applies to the business-use portion of the vehicle. If your car is 70% business and 30% personal, you write off 70% of the cost. An accurate logbook is essential to substantiate this percentage.
Tripbook automatically tracks every trip with GPS. At the end of your logbook period, your exact business-use percentage is calculated from real driving data. Export an ATO-compliant report to support your write-off claim.
Download Tripbook to ensure your instant asset write-off claim is backed by accurate business-use records.
