The instant asset write-off and truck depreciation are two different ways an Australian business may claim the cost of an eligible business asset for tax purposes.
The main difference is when the deduction occurs.
An eligible asset that falls below the instant asset write-off threshold may potentially be deducted immediately in the income year it is first used or installed ready for use.
A higher-value truck that does not qualify for the instant asset write-off will generally be depreciated over time under the applicable depreciation rules.
For truck buyers, this distinction matters because most commercial trucks cost substantially more than the current instant asset write-off threshold.
From 1 July 2026, eligible small businesses with aggregated annual turnover below $10 million using simplified depreciation can potentially immediately deduct the taxable-use portion of eligible depreciating assets costing less than $20,000. The threshold applies per asset and can apply to eligible new and second-hand assets.
That means a $150,000 rigid truck, $200,000 tipper or $250,000 prime mover generally does not qualify for an immediate deduction under the $20,000 instant asset write-off.
Instead, depreciation is likely to become the more relevant tax treatment.
Financing the truck does not change that threshold.
A financed truck and a truck purchased with cash are still assessed under the relevant tax rules based on the asset, business and transaction.
The Asset Finance Shop (TAFS) primarily arranges chattel mortgage finance for eligible commercial vehicles, machinery and business equipment. Under this structure, the business owns the asset from settlement while the lender registers security over it.
This guide explains instant asset write-off versus truck depreciation, how financed trucks are treated, and what Australian small businesses should consider before purchasing a commercial vehicle for tax purposes.
|
Instant Asset Write-Off |
Depreciation |
|
|
Deduction timing |
Potentially immediate |
Claimed over time |
|
Asset cost |
Must be below applicable threshold |
Generally applies where asset exceeds immediate write-off threshold |
|
Current threshold from 1 July 2026 |
Less than $20,000 |
Relevant for higher-value assets |
|
New assets |
Potentially eligible |
Yes |
|
Used assets |
Potentially eligible |
Yes |
|
Financed assets |
Potentially eligible |
Yes |
|
Business use required |
Yes |
Yes |
|
Finance changes eligibility |
No |
No |
|
Common for normal commercial trucks |
Less common |
Much more common |
The key point is simple:
The instant asset write-off is determined by eligibility and asset cost, not by whether you finance the truck.
The instant asset write-off allows an eligible small business to claim an immediate deduction for the business-use portion of a qualifying depreciating asset.
Instead of claiming the asset's cost gradually through depreciation, the eligible amount can potentially be claimed in the income year the asset is first used or installed ready for use.
From 1 July 2026, the $20,000 instant asset write-off became permanent for eligible small businesses.
To potentially qualify, the business generally needs to:
The $20,000 threshold applies to each eligible asset individually.
The wording matters.
The asset needs to cost less than $20,000.
For example:
$15,000 asset: Potentially eligible
$19,500 asset: Potentially eligible
$19,999 asset: Potentially eligible
$20,000 asset: Does not fall below the threshold
$70,000 truck: Does not qualify under the $20,000 threshold
$200,000 prime mover: Does not qualify under the $20,000 threshold
The other eligibility requirements still need to be satisfied.
Yes.
It is not a total annual equipment budget.
For example, an eligible business might purchase:
Asset A: $12,000
Asset B: $17,000
Asset C: $9,000
Each asset may potentially be assessed separately against the threshold.
The fact that the combined purchases exceed $20,000 does not automatically prevent each qualifying asset from being considered individually.
Potentially.
The instant asset write-off can apply to eligible:
subject to the other requirements being satisfied.
This can make the write-off relevant to some lower-value used commercial vehicles and equipment.
However, most late-model commercial trucks will still exceed the $20,000 threshold.
Depreciation recognises that a business asset loses value or provides economic benefit over time.
Rather than deducting the entire eligible cost immediately, the business claims deductions progressively according to the applicable depreciation rules.
For higher-value commercial trucks, this will generally be much more relevant than the instant asset write-off.
Examples include:
A truck can cost tens or hundreds of thousands of dollars.
That puts it well above the $20,000 instant asset write-off threshold in many cases.
For eligible small businesses using simplified depreciation, depreciating assets costing $20,000 or more generally cannot receive the immediate $20,000 write-off and are instead added to the small business depreciation pool.
Current ATO guidance confirms that assets costing $20,000 or more move into the small business depreciation pool rather than receiving an instant deduction.
Under the simplified depreciation system, the pool generally uses:
The exact calculation depends on the business, timing and applicable tax rules, so your accountant should calculate the actual deduction.
Generally, no.
This is one of the most common misunderstandings about the instant asset write-off.
Consider:
Truck cost: $100,000
You do not generally apply the rule like this:
First $20,000: Instant deduction
Remaining $80,000: Depreciation
The threshold determines whether the asset qualifies for the immediate deduction.
If the asset itself costs $20,000 or more, it generally falls outside the instant write-off and is dealt with under the applicable depreciation rules.
Consider a civil business purchasing:
Tipper truck: $180,000
The truck is used entirely for business.
The vehicle costs substantially more than $20,000.
The business therefore cannot simply use the instant asset write-off to deduct the entire purchase price immediately.
Instead, the accountant may need to consider:
The truck can still produce meaningful tax deductions.
They simply occur differently.
Consider an eligible small business buying an older commercial truck for:
$18,000
The truck is:
If the business also satisfies the small business eligibility requirements, the business-use portion may potentially qualify for the instant asset write-off.
That is very different from a $180,000 truck.
Not simply because finance is used.
The finance method and the tax treatment are separate.
Consider two identical assets.
Buys an eligible asset for:
$18,000 cash
Buys the same eligible asset for:
$18,000 using finance
Using finance does not automatically prevent Business B from qualifying.
Eligibility still depends on:
No.
Consider:
Truck cost: $150,000
Deposit: $20,000
Finance: $130,000
The fact that the business contributes $20,000 does not make the truck a $20,000 asset.
Likewise, financing only part of the purchase price does not reduce the truck's underlying cost to the amount borrowed.
The truck still exceeds the instant asset write-off threshold.
A deposit primarily changes the finance structure.
For example:
Truck: $160,000
Deposit: $40,000
Finance: $120,000
The deposit affects:
It does not simply turn the truck into a $120,000 asset for tax purposes.
The asset purchase and finance need to be treated separately.
Do not assume so.
Consider:
Replacement truck: $70,000
Trade-in: $55,000
Cash difference: $15,000
The fact that the business only needs to fund a $15,000 difference does not automatically mean the replacement truck costs $15,000 for instant asset write-off purposes.
The replacement truck purchase and disposal of the existing truck need to be considered correctly.
Your accountant should confirm how the trade-in affects the tax calculation.
GST can affect the asset's relevant cost.
Where a business is registered for GST and entitled to claim the full GST credit, the claimable GST component is generally excluded when determining the asset cost for depreciation purposes.
If the business is not registered for GST, GST may form part of the asset's cost.
This can affect whether an asset sits above or below the relevant threshold.
For example, a business should not simply look at the invoice total and assume that is always the relevant figure.
Speak with your accountant about the correct GST-adjusted cost.
The seller can also affect the GST position.
A GST-registered truck dealer may charge GST and provide a tax invoice.
A private seller may not charge GST.
That means two trucks with similar advertised prices can have different GST outcomes.
The finance may still be available for either purchase, but the tax calculation can differ.
Potentially.
Purchasing the truck privately does not automatically stop it from being a depreciating business asset.
The important factors include:
The absence of GST on a private sale should not be confused with depreciation eligibility.
Potentially.
An eligible truck bought at auction can still be considered under the relevant depreciation rules.
If the asset cost falls below the instant asset write-off threshold and all other requirements are satisfied, it may potentially qualify for immediate deduction.
For most commercial auction trucks worth substantially more than $20,000, depreciation will instead be more relevant.
Consider two businesses.
Purchases equipment for:
$17,000
The business meets the relevant small business requirements.
The equipment may potentially qualify for an immediate deduction.
Purchases a truck for:
$170,000
The business also meets the small business requirements.
But the truck exceeds the threshold.
It will generally need to be dealt with under depreciation rather than the $20,000 instant asset write-off.
The difference is not the business.
It is primarily the asset cost and applicable eligibility rules.
Timing is important.
For the instant asset write-off, the relevant asset generally needs to be first used or installed ready for use during the relevant income year.
Simply:
may not necessarily be enough.
For example:
Truck delivered and ready for business use on:
25 June
Truck ordered in June but delivered on:
15 July
These purchases fall into different income years for timing purposes.
Your accountant should confirm which year the deduction belongs in.
No.
The business does not generally have to repay the entire finance facility before considering depreciation or an eligible instant asset write-off.
Finance and tax are separate.
A truck can still have:
while the business accounts for the asset according to the applicable depreciation rules.
TAFS primarily arranges chattel mortgage finance for eligible commercial vehicles and equipment.
With a chattel mortgage:
Because the business owns the asset, eligible depreciation treatment may apply according to the business's circumstances and applicable tax rules.
The finance itself then creates separate considerations around principal and interest.
Do not assume so.
A truck finance repayment generally contains:
Repayment of the money borrowed.
The cost of borrowing.
The complete repayment should not automatically be treated as one deductible expense.
For example:
Monthly truck payment: $5,000
That does not automatically create:
$5,000 deductible expense each month.
Eligible business-use interest may potentially be deductible, while the truck itself may be depreciated separately.
Potentially.
Where money is borrowed for an income-producing business purpose, eligible interest may potentially be deductible to the extent it relates to business use.
For a truck used completely within a transport business, this may be relatively straightforward.
Where a vehicle also has private use, an adjustment may be required.
Your accountant should determine the actual claim.
Potentially.
They relate to different things.
Relates to the asset.
Relates to the cost of borrowing money to fund the asset.
This is why financing a business asset can create more than one tax consideration.
It does not mean the business is deducting the same expense twice.
Potentially.
Eligible business-use truck operating expenses can include items such as:
These expenses are separate from:
The business still needs to satisfy the normal deduction requirements.
Only the eligible business-use portion should generally be considered for business tax deductions.
For example:
Business use: 80%
Private use: 20%
The business may need to apportion eligible costs accordingly.
This can potentially affect:
Commercial heavy trucks used exclusively in transport operations may have a clearer business-use position than mixed-use vehicles such as utes.
Yes.
The treatment of business vehicles can depend partly on whether you operate through:
The purchasing entity should therefore be considered before the truck is financed.
Ask your accountant:
Which entity should purchase and own the truck?
TAFS can then structure the finance around the appropriate borrower.
Not necessarily.
An immediate deduction can be attractive because the eligible amount is claimed sooner.
But that does not mean you should choose a lower-value or unsuitable truck purely because it qualifies.
Consider two trucks:
Price: $18,000
Condition: Older
Expected remaining life: Limited
Price: $120,000
Condition: Strong
Expected remaining life: Long
Truck A may potentially qualify for the instant write-off.
Truck B may not.
That does not automatically make Truck A the better commercial purchase.
The business still needs the right asset for the work.
The purchase should make commercial sense first.
A truck may be worth purchasing because it:
The tax treatment should support the decision.
It should not be the only reason for making it.
Suppose a transport business intends to purchase a truck before the end of the income year.
The business should confirm:
Do not assume paying a deposit before 30 June guarantees a deduction in that income year.
Timing rules matter.
This is another decision that should be separated from the depreciation question.
Consider:
Truck: $180,000
Cash reserves: $220,000
Cash remaining:
$40,000
Advantages:
But significantly less working capital remains.
The business retains more cash.
That capital can remain available for:
The trade-off is:
The depreciation position of the truck does not simply disappear because finance is used.
A balloon primarily changes how the finance is repaid.
For example:
Truck finance: $160,000
Term: 5 years
Balloon: $30,000
The balloon generally reduces regular repayments but leaves $30,000 outstanding at the end.
This can affect:
It does not automatically change how the truck itself is depreciated.
Not automatically.
A balloon should primarily be considered in relation to:
It should not be increased simply to try to manipulate deductions.
Selling or trading a depreciated business asset can have tax consequences.
The business may need to consider:
This is why tax planning should not stop at the original purchase.
Your accountant should also explain what may happen when the truck eventually leaves the business.
Maintain records supporting the truck purchase and use.
These may include:
Good documentation makes it easier for the accountant to determine the correct claim.
Check:
If yes, the instant asset write-off may potentially apply.
The instant asset write-off generally does not apply to the asset cost.
For eligible small businesses using simplified depreciation, the asset generally moves into the small business depreciation pool.
Depreciation is likely to be much more relevant than the $20,000 instant asset write-off.
Finance does not automatically change which depreciation treatment applies.
The eligible business-use proportion needs to be considered.
Before relying on a truck tax deduction, ask:
Once the tax position has been discussed, ask:
TAFS handles the commercial finance side of the transaction.
The process can include:
TAFS can compare suitable commercial asset finance options through access to more than 80 bank and non-bank lenders.
Your accountant should separately confirm:
The instant asset write-off can potentially allow an eligible business to deduct the business-use portion of a qualifying asset immediately.
Depreciation claims the asset's cost over time under the applicable rules.
From 1 July 2026, eligible small businesses using simplified depreciation can potentially immediately deduct eligible assets costing less than $20,000. The business generally needs aggregated annual turnover below $10 million.
Generally not under the $20,000 instant asset write-off.
The truck exceeds the threshold.
Generally, no.
The threshold applies to whether the asset itself qualifies.
For eligible businesses using simplified depreciation, higher-value depreciating assets generally enter the small business depreciation pool.
Potentially.
Eligible second-hand assets can qualify where the other requirements are satisfied.
Potentially.
Financing does not itself determine eligibility.
Not simply because less money is borrowed.
A deposit mainly affects the finance amount.
Do not assume so.
The replacement purchase and disposal of the existing truck need to be treated correctly.
Potentially.
Financing does not automatically prevent depreciation.
Eligible business-use interest may potentially be deductible.
Do not assume so.
The repayment normally includes both principal and interest.
Eligible business-use running costs such as fuel, insurance, repairs, registration and servicing may potentially be deductible.
Yes.
Claims generally need to reflect the eligible business-use proportion.
Potentially.
The relevant asset cost can depend on the business's GST registration and entitlement to input tax credits.
No.
TAFS specialises in commercial asset finance.
Your accountant or registered tax adviser should confirm the applicable tax treatment.
TAFS can compare suitable commercial asset finance options through access to more than 80 bank and non-bank lenders.
For most normal commercial truck purchases, depreciation will be more relevant than the $20,000 instant asset write-off simply because the truck costs substantially more than the threshold.
That does not mean a higher-value truck has no tax benefits.
Depending on the business, relevant considerations can still include:
The important distinction is between:
how the truck is treated for tax
and:
how the truck is funded.
TAFS can structure the commercial finance around the purchase through access to more than 80 bank and non-bank lenders.
Your accountant can then determine whether the truck is eligible for an immediate deduction or needs to be depreciated under the applicable rules.
The Asset Finance Shop (TAFS) is a commercial asset finance brokerage based in Sydney. Information on this page is general in nature and doesn’t take your personal circumstances into account. Speak to a TAFS broker for options tailored to your business, and to your accountant regarding tax treatment.