A tax deduction has never repaid a loan. Yet plenty of small business vehicles and equipment are still bought on the strength of the deduction, with the finance sorted out as an afterthought. A rule change this year removes the last excuse for doing it in that order.
The deadline has gone
For years the instant asset write-off was a moving target. The threshold was renewed, resized or replaced from one budget to the next, and owners learned to buy in June in case it vanished in July. Dealers and vendors learned to sell that way too.
That has ended. The Australian Taxation Office now describes the measure as a permanent increase in the instant asset write-off for small businesses to A$20,000 from 1 July 2026, and states that it is law. It applies to businesses with an aggregated turnover of less than A$10 million, on a per asset basis.
The permanence matters more than the number. With no cliff on 30 June, there is no tax reason to buy in a hurry. A purchase can be judged on what it does for the business, in whichever month the business is ready for it.
What a lender looks at instead
A lender does not assess the deduction. It assesses whether the business can carry the repayment out of the cash it already generates. On a vehicle or equipment loan for a self-employed borrower, that usually means how long the ABN has been active, whether the business is registered for GST, what the bank statements show and how existing debts have been handled.
None of those improve because a deduction is available. It helps to understand how equipment finance is assessed before an end-of-month sales deadline sets the timetable, because the approval is built on trading history, not on the tax position.
What A$20,000 does and does not cover
The limit is per asset. A set of laptops, a diagnostic tool or a small server will usually fit under it. A work vehicle usually will not.
Under the ATO's rules, an asset costing A$20,000 or more goes into the small business depreciation pool instead, where it is deducted at 15% in the first year and 30% in each year after that. Passenger cars also face a separate cost ceiling for depreciation, which the ATO has set at A$69,883 for 2026-27.
So the vehicle bought in June "for the write-off" is often not written off at all. A fraction of it is deducted in the first year. The repayments can run for five.
A deduction is a discount, not a refund
The arithmetic is simple and often skipped. A deduction reduces taxable income. It does not return the purchase price. For a company taxed at 25%, a A$20,000 deduction is worth A$5,000. The other A$15,000 has still been spent.
The timing is lopsided as well. The repayment starts next month. The tax benefit arrives when the return is lodged, which can be more than a year away.
The worst version of this is paying cash in June to capture a deduction, then borrowing short term in August to cover wages. The business has swapped cheaper, longer-dated asset finance for expensive working capital, and called it tax planning.
Three questions before the order goes in
Would the business buy it at full price with no deduction at all? If the answer is no, the deduction is doing the selling.
Does it earn or save more than its repayment each month? A second service vehicle that lets a business take on another contract passes. A newer version of something that already works often does not.
Does the loan term match the working life of the asset? Hardware that will be replaced in three years should not be funded over five. A vehicle kept for seven can carry a longer term comfortably.
If all three answers are yes, the purchase stands on its own, and the tax treatment is a welcome extra to raise with an accountant.
How the structure changes the answer
The way an asset is funded matters as much as whether it is bought. A loan secured against the asset itself is usually priced below unsecured working capital, and it leaves the overdraft free for the job an overdraft is meant to do. Paying cash feels prudent and often is not, because cash is the one asset every other creditor will accept.
A balloon at the end of the term lowers the monthly repayment and leaves a lump sum to deal with later. That suits a vehicle with a predictable resale value. It suits a server rack far less.
Good equipment, bought for the right reason
None of this is an argument against investing. Businesses that put off replacing worn equipment pay for it in downtime and lost work. The point is the order of the questions. Need first, cash flow second, finance structure third, tax last.
The write-off is a reason to feel better about a purchase the business was already going to make. It is not a reason to make one.
This piece sits on the lending side. How any asset is treated for tax is a question for the business's accountant.