Bonus Depreciation Australia 2025: Rules, Benefits, and Strategies

Bonus depreciation is back in the spotlight for Australian businesses in 2025, following recent legislative tweaks and a renewed focus on economic recovery. With the government fine-tuning instant asset write-off thresholds and bonus depreciation schedules, it’s crucial for business owners, CFOs, and finance managers to understand how to make the most of these incentives this financial year.

What is Bonus Depreciation and How Has It Changed in 2025?

Bonus depreciation allows businesses to immediately deduct a significant portion—or sometimes all—of the cost of eligible depreciating assets, rather than spreading deductions over several years. In Australia, this concept has evolved through policies like the instant asset write-off and temporary full expensing measures introduced during the pandemic. While temporary full expensing ended on 30 June 2024, the 2025 Federal Budget introduced a new iteration: a $20,000 instant asset write-off for small businesses (with an aggregated turnover under $10 million) for the 2024–25 financial year.

• Eligible assets: Most new or second-hand business assets costing less than $20,000, installed and ready for use between 1 July 2024 and 30 June 2025.

• Exclusions: Certain assets, like capital works and horticultural plants, are not eligible. Motor vehicles may have specific limits.

• Medium and large businesses: The generous temporary full expensing rules have ceased, so standard depreciation rules now apply to larger businesses, impacting their capital investment strategies.

For many SMEs, this change means continued flexibility in upgrading equipment or technology with immediate tax relief, but the capped threshold is a step down from the pandemic-era unlimited expensing.

How Businesses Are Leveraging Bonus Depreciation in 2025

With the new $20,000 threshold, small businesses are recalibrating their asset purchases. Here’s how Australian companies are adapting:

• Tradies and contractors: Investing in new tools, utes, and small machinery under the $20,000 cap for instant write-offs.

• Retail and hospitality: Upgrading point-of-sale systems, fridges, and kitchen equipment, maximising deductions within the new limit.

• Professional services: Purchasing computers, office furniture, and software subscriptions to support hybrid work models.

Example: A Melbourne café owner replaces an ageing coffee machine for $15,000 in July 2024. Under the 2025 instant asset write-off, the full cost is immediately deductible, reducing the business’s taxable income for the year.

Tax Planning Strategies and Pitfalls to Avoid

With bonus depreciation rules shifting, businesses should be proactive in their 2025 tax planning:

• Timing matters: Ensure assets are installed and ready for use before 30 June 2025 to claim the deduction this financial year.

• Don’t exceed the threshold: If an asset costs more than $20,000, it won’t qualify for the instant write-off and must be depreciated over its effective life.

• Cash flow is king: While immediate deductions are attractive, be wary of overcapitalising or straining your cash reserves.

• Pooling rules: Assets over the threshold can be added to the small business depreciation pool and written off at 15% in the first year and 30% thereafter.

Recent ATO data shows a surge in asset purchases during the final quarter of 2024, as businesses sought to lock in deductions before temporary full expensing ended. In 2025, strategic timing and threshold awareness are key to maximising value under the new rules.

Looking Ahead: Will Bonus Depreciation Evolve Further?

While the $20,000 instant asset write-off is legislated for the 2024–25 year, business groups are lobbying for higher thresholds and permanent measures. The government has signalled openness to ongoing review, especially as small business sentiment remains a key economic barometer. For now, staying agile and informed is essential as policies continue to shift in response to economic conditions.