If you run a small business and you’ve been weighing up a new work vehicle, the next few weeks matter. The $20,000 instant asset write-off applies for the 2025–26 financial year, but only for assets that are first used or installed ready for use by 30 June 2026. Ordering a car that arrives in July won’t cut it.
Here’s how the write-off actually applies to cars, utes and vans — including the traps around the $20,000 threshold, the car cost limit, and what changes from 1 July.
How the instant asset write-off works in 2025–26
For the 2025–26 financial year, small businesses with an aggregated turnover under $10 million can immediately deduct the full cost of eligible depreciating assets costing less than $20,000 each. The threshold applies per asset, so you can write off several assets in the same year.
Three things to get right:
- Timing. The asset must be first used, or installed ready for use, between 1 July 2025 and 30 June 2026. Delivery date matters, not order date.
- Business use. You can only deduct the business-use percentage. If a vehicle is used 60% for business, you claim 60% of the cost (and the cost still needs to sit under the threshold to qualify).
- GST. If you’re registered for GST, the threshold is assessed on the GST-exclusive cost.
From 1 July 2026, the government has announced it intends to make the $20,000 write-off permanent — but that measure isn’t law yet, so don’t bank on next year’s rules when this year’s deadline is certain.
The obvious problem: most cars cost more than $20,000
Realistically, very few new cars come in under $20,000. So where does that leave you?
Vehicles under $20,000 — instant deduction
Second-hand utes, vans, trailers and work vehicles under the threshold qualify for the full immediate deduction (business-use portion only). Used assets are eligible — the write-off isn’t limited to new vehicles.
Vehicles $20,000 or over — small business pool
A vehicle at or over $20,000 isn’t excluded from a deduction; it just moves into the small business depreciation pool, where you deduct 15% in the first year and 30% of the remaining balance each year after. Still a meaningful first-year deduction on a $45,000 ute — roughly $6,750 in year one — just not the whole lot at once.
The car cost limit
For passenger cars (designed to carry less than one tonne and fewer than nine passengers), depreciation deductions are capped at the car limit of $69,674 for 2025–26. Spend more and you can’t depreciate the excess. The maximum GST credit you can claim is also capped at $6,334 (1/11th of the limit).
The ute exception: vehicles with a payload over one tonne — most dual-cab and single-cab utes, and many vans — aren’t “cars” for tax purposes, so the car limit doesn’t apply. This is one reason utes are so popular as business vehicles. (Luxury car tax may still apply above $80,567, or $91,387 for fuel-efficient vehicles.)
Financing the vehicle doesn’t cost you the deduction
A common misconception is that you need to pay cash to claim the write-off. You don’t.
Under a chattel mortgage — the most common business vehicle loan structure — you take ownership of the vehicle from day one, which means:
- You can claim the depreciation deduction (instant write-off or pool) even though you’re paying the vehicle off over time.
- The interest on the loan is also deductible.
- If you’re registered for GST on a cash basis, you can typically claim the GST on the purchase price up front in your next BAS.
We’ve covered the detail in our guide to chattel mortgages vs car loans. The short version: structure matters as much as the purchase itself, and the right structure depends on how your business accounts for GST and income.
A lease works differently — the financier owns the vehicle, so you claim lease payments instead of depreciation, and the instant asset write-off generally isn’t available to you.
Buying through your business: a 30 June checklist
- Confirm eligibility — aggregated turnover under $10 million and you’re claiming under the simplified depreciation rules.
- Check stock, not brochures — the vehicle must be delivered and ready to use by 30 June 2026. Ask the dealer to confirm delivery in writing.
- Work out your business-use percentage honestly — a logbook is the cleanest evidence.
- Choose the finance structure first — chattel mortgage, lease and consumer car loan each have different tax outcomes. Don’t sign the dealer’s paperwork before you’ve compared.
- Get pre-approved early — June is the busiest month of the year for business lending, and approvals can slow down right when your deadline can’t move.
- Talk to your accountant — a deduction is only worth your marginal tax rate; never buy something you don’t need just for the write-off.
An ABN car loan can be arranged with low-doc options if your financials aren’t up to date — common for sole traders this time of year. For larger purchases or multiple vehicles, see our business car finance and commercial finance options.
FAQ
Can I claim a car under the instant asset write-off?
Yes, if your business turnover is under $10 million, the vehicle costs less than $20,000 (GST-exclusive if registered), and it’s first used for business by 30 June 2026. You claim the business-use percentage only.
Does the $20,000 limit apply per car or in total?
Per asset. You can write off multiple eligible assets in the same financial year, as long as each one individually costs less than $20,000.
What if my ute costs more than $20,000?
It goes into the small business pool: 15% deduction in year one, 30% of the balance each year after. If the pool balance falls under $20,000 at year end, the whole pool can be written off.
Can I claim the write-off on a financed vehicle?
Yes — under a chattel mortgage you own the asset, so depreciation deductions (and loan interest) are claimable even while you’re repaying the loan. Leases work differently.
Is a second-hand car eligible?
Yes. The instant asset write-off applies to both new and used assets.
What happens after 30 June 2026?
The government announced in the 2026–27 Budget that it will make the $20,000 instant asset write-off permanent from 1 July 2026, but this is not yet legislated. The certain opportunity is the current financial year.
Written and reviewed by the Finance Director at Alpha390.
This article is general information only and does not constitute credit or financial advice. It does not take into account your personal objectives, financial situation or needs. Consider whether the information is appropriate for you and seek professional advice before acting. Alpha390 operates under Australian Credit Licence 506065 (Five Tees Pty Ltd). Lending is subject to approval, lending criteria, terms, conditions and fees. Tax outcomes depend on your circumstances — consult a registered tax agent. Thresholds and limits cited are for the 2025–26 financial year and are subject to change.
