- The $20,000 instant asset write-off for small businesses is now permanent from 1 July 2026, after legislation passed in August 2026.
- It applies per asset, to businesses with aggregated turnover under $10 million, and the asset must be first used or installed ready for use in the income year.
- Most franchise fit-outs are a mix: some items can be written off immediately, some are depreciated over time, and some are capital works deductible at 2.5% a year.
- The franchise licence fee itself is not a depreciating asset for the write-off.
- An itemised fit-out invoice from the franchisor or builder is the single most useful document for your tax return.
A new franchise often means a fit-out bill of $150,000 to $500,000 or more. How that bill is split up for tax can change your cash position in year one by tens of thousands of dollars. The rules aren’t complicated, but they reward good records.
The instant asset write-off from 1 July 2026
The ATO’s instant asset write-off lets eligible small businesses deduct the full cost of a depreciating asset in the year it’s first used or installed ready for use, as long as the asset costs less than the threshold. The $20,000 threshold had been extended one year at a time. PwC reported in October 2026 that the Treasury Laws Amendment (Tax Reform No. 2) Bill 2026 passed in August 2026, making the $20,000 threshold permanent from 1 July 2026.
- Your business (with affiliates and connected entities) has aggregated turnover under $10 million.
- Each asset costs less than $20,000 (GST-exclusive if you’re registered for GST).
- The asset is first used or installed ready for use in the income year you claim it.
- You use the simplified depreciation rules for small business.
Per asset, not per invoice. A $180,000 fit-out invoice may include a $14,000 coffee machine, an $8,000 POS setup and a $6,000 fridge. Each of these can qualify separately. Without an itemised invoice, you can’t show that.
How a typical fit-out breaks down
| Item | Usual treatment |
|---|---|
| Commercial kitchen equipment, coffee machines, fridges | Depreciating assets. Instant write-off if each is under $20,000, otherwise small business pool |
| POS terminals, computers, screens, menu boards | Depreciating assets |
| Loose furniture, tables, chairs, shelving | Depreciating assets |
| Partitions, shopfront, ceilings, flooring, built-in joinery | Often capital works (2.5% a year), depending on facts |
| Signage | Depends on whether it’s fixed to the building or freestanding |
| Franchise licence fee | Not depreciable. Part of the licence cost base |
Treatment depends on how each item is installed and the lease terms. A quantity surveyor’s report can help on larger fit-outs.
Assets over the threshold
Assets costing $20,000 or more go into the small business simplified depreciation pool. They’re deducted at 15% in the first year and 30% each year after that. Where landlord incentives or fit-out contributions are involved, the treatment can change. Get those reviewed separately.
Timing matters
The asset must be first used or installed ready for use in the year you claim it. A store that pays for equipment in June but opens in August generally claims in the next income year. Build that timing into your first-year cash flow forecast.
Records to keep
- An itemised fit-out invoice listing each asset and its cost.
- Delivery and installation dates for major equipment.
- The store opening date.
- Any lease incentive, landlord contribution or franchisor subsidy.
- Finance agreements, if the equipment is leased or financed.
Frequently asked questions
Can I use the instant asset write-off for a franchise fit-out?
For eligible items, yes. Each depreciating asset that costs under $20,000 and is first used or installed ready for use in the year can be written off, provided your aggregated turnover is under $10 million. Building works are usually treated differently.
Is the $20,000 instant asset write-off permanent?
PwC reported that legislation passed in August 2026 made the $20,000 threshold permanent from 1 July 2026. Check the ATO page for the current position before you buy.
Can I write off the franchise fee?
No. The franchise licence fee forms part of the cost base of the licence. It isn’t a depreciating asset for the write-off.
Opening a new store or buying an existing one? We can review the fit-out invoice and model the first-year tax position. Book a 15-minute call or see our franchise accounting and tax service.
This article is general information only and does not take into account your personal circumstances. It is not tax, legal or financial advice. Speak with a registered tax agent before acting.
Sources
- ATO: $20,000 instant asset write-off
- PwC Tax Alert: loss carry-back and instant asset write-off (October 2026)
Sources checked November 2026. Rules change. Confirm current guidance before acting.
Talk it through
Every franchise is different. Ask us how this applies to yours.
