What Is Temporary Full Expensing?

Temporary full expensing (TFE) was introduced by the Australian Government as part of the COVID‑19 economic recovery package. It allowed businesses to immediately deduct the full cost of eligible capital assets, rather than depreciating them over several years.

The policy aimed to encourage business investment by improving cash flow and reducing the tax burden in the year of purchase. While the uncapped version of TFE ended on 30 June 2023, small businesses can still access an enhanced instant asset write‑off threshold for the 2024‑25 income year.

For FY 2025‑26 onwards, businesses need to understand the transitional rules and the backup option available under the simplified depreciation regime. The ATO continues to publish updated guidance for each income year.

Key Dates and Thresholds for 2025

The temporary full expensing rules changed significantly after 30 June 2023. Here is what applies for the 2024‑25 and 2025‑26 income years.

The $150,000 threshold applies to each individual asset. You can write off multiple assets in the same year as long as each one costs less than $150,000. Assets costing $150,000 or more must still be placed into a small business pool and depreciated at 15% in the first year and 30% thereafter.

Eligibility Criteria for Small Business Entities

To claim the instant asset write‑off under the simplified depreciation rules, your business must qualify as a small business entity. This means your aggregated turnover must be less than $10 million in the previous income year.

The asset must be used or installed ready for use by 30 June 2025. It must be primarily used for carrying on your business. The asset can be new or second‑hand, but it cannot be part of a pooling arrangement for horticultural plants or certain software.

If you are a sole trader, partnership, company, or trust that meets the turnover test, you are generally eligible. You do not need to register for anything separately — simply claim the deduction in your annual tax return.

How to Claim Temporary Full Expensing

Claiming is straightforward. When you lodge your business tax return for the relevant income year, include the full cost of each eligible asset as a deduction under the simplified depreciation rules.

For most small businesses using the ATO's myTax or a registered tax agent, you will enter the asset details in the depreciation schedule section. The ATO system automatically applies the instant asset write‑off threshold to assets costing up to $150,000.

Keep records of the purchase date, cost, supplier details, and evidence that the asset is used for business purposes. The ATO may request these records during a review or audit. If you use an instant asset write‑off calculator, you can estimate your potential tax saving before purchasing.

Assets That Qualify and Assets That Don't

Most tangible depreciating assets qualify for the instant asset write‑off. This includes vehicles (subject to car limit rules), machinery, office equipment, tools, furniture, and fit‑out costs.

Some assets do not qualify. These include horticultural plants, assets you have allocated to a low‑value pool, and capital improvements to land. Assets leased out to another entity may also have restrictions depending on the lease structure.

For motor vehicles, there is a separate car cost limit of $68,108 for the 2024‑25 income year. If you buy a car costing more than this, you can only immediately write off up to the car limit. The balance is added to the small business pool.

Interaction With Other Tax Concessions

The instant asset write‑off interacts with several other business tax concessions. If you are a base rate entity, your corporate tax rate may be lower, which affects the value of the deduction. Use an income tax calculator to model your effective tax rate.

The deduction reduces your taxable income, which also reduces your Medicare levy liability. However, it does not reduce your assessable income for HECS‑HELP repayment purposes if you are repaying a student loan. HECS repayments are calculated on your repayment income, which adds back certain deductions.

The simplified depreciation rules also allow for a $150,000 instant asset write‑off pool balance deduction. Once your small business pool balance falls below $150,000 at the end of an income year, you can deduct the entire remaining balance immediately. This is separate from the per‑asset threshold.

Frequently Asked Questions

Does temporary full expensing still apply in 2025?

The unlimited version of TFE ended on 30 June 2023. However, small businesses (aggregated turnover under $10 million) can still claim an instant asset write‑off of up to $150,000 per asset under the simplified depreciation rules for the 2024‑25 income year. This threshold has been proposed for extension through legislation.

Can I claim temporary full expensing for a second‑hand asset?

Yes, under the simplified depreciation rules, second‑hand assets costing less than $150,000 are eligible for the instant asset write‑off. The asset must be used primarily for business purposes and must be installed and ready for use by 30 June 2025.

What happens if my asset costs more than $150,000?

If an asset costs $150,000 or more, you cannot claim the instant asset write‑off. Instead, the asset must be added to your small business pooling arrangement. You then claim a 15% depreciation deduction in the first year and 30% each year after that.

How does the instant asset write-off reduce my tax?

If you are a sole trader and buy a $50,000 piece of equipment, you can deduct the full $50,000 from your business income. If you are in the 30% tax bracket (plus 2% Medicare levy), this saves you approximately $16,000 in tax. Use a take‑home pay calculator to see how deductions affect your after‑tax position.

Do I need to register for temporary full expensing?

No registration is required. Simply claim the deduction in your annual tax return through the depreciation schedule. The ATO has built the simplified depreciation rules into myTax and all standard tax return software.