Instant asset write-off FAQs: What construction businesses need to know

The Australian Government has permanently enshrined the $20,000 instant asset write-off in the tax system as part of the 2026–27 Federal Budget. For construction businesses, this means no more uncertainty about whether the scheme would be extended, allowing operators to plan machinery and equipment purchases with confidence.

Here we address the key questions construction businesses are likely to have about the rules of the scheme.

The instant asset write-off (IAWO) allows eligible small businesses to deduct the full cost of an eligible asset in the same financial year it is first used or installed, rather than depreciating it over multiple years.

It is not a cash hand-out — it is a tax deduction that reduces your taxable income and therefore your overall tax bill.

$20,000 per asset.

Yes. The $20,000 threshold is now permanent. Previously, the scheme operated on a temporary basis and required annual renewal, with the threshold changing frequently.

Your business must have an aggregated annual turnover of less than $10 million. The asset must be first used or installed ready for use on or after July 1, 2026 to fall under the permanent arrangements.

Assets costing $20,000 or more cannot be immediately written off under this measure. Instead, they are added to the small business depreciation pool and claimed over several years — at 15 per cent in the first income year and 30 per cent each income year after that.

Yes. Eligible construction equipment and plant that costs less than $20,000 per item can be immediately deducted. This includes tools, compactors, generators, site equipment and smaller machinery. Both new and second-hand assets qualify, provided they meet the eligibility criteria.

Yes, if the vehicle is purchased for business purposes and its total cost is equal to or less than $20,000 — note this refers to the total purchase price, not just the business-use portion.

This applies to all vehicle types, including passenger vehicles, utes, trucks and other working vehicles, provided the total purchase price is less than $20,000.

If a vehicle costs $20,000 or more, it cannot be claimed under the instant asset write-off. Instead, it must be added to the small business depreciation pool and claimed over several years — at 15 per cent in the first income year and 30 per cent each income year after that.

The $20,000 threshold applies on a per-asset basis. This means you can write off multiple eligible items in the same financial year, provided each individual asset costs less than $20,000.

Yes, but only the proportion used for business purposes is claimable. For example, if a piece of equipment worth $18,000 is used 80 per cent of the time for business, you can claim a deduction of $14,400. Note that the entire cost of the asset must be less than the $20,000 limit, not just the business-use portion.

This article contains general information only and does not constitute financial or tax advice. Speak to your accountant or tax adviser about how the instant asset write-off applies to your specific circumstances.