Tax Planning
Instant Asset Write-Off & Non-Deductibility of ATO Interest Charges: What Small Businesses Need to Know
Major changes in deductions are changing the game for small business cash flow—learn how the instant asset write-off extension and changes to interest deductions alter your tax strategy for FY2025-26 and beyond.
By NomadicTax Research Team • 5-8 min read • February 21, 2026
## What’s New: Instant Asset Write-Off & Interest Charge Deductibility
### Instant Asset Write-Off
- Small businesses with turnover **under A$10 million** can immediately deduct the full cost of eligible assets costing **less than A$20,000**, provided they are first used or installed ready for use for a taxable purpose between **1 July 2025 and 30 June 2026**. ([ifpa.com.au](https://ifpa.com.au/6-february-2026/?utm_source=openai))
### ATO General Interest Charge (GIC) & Shortfall Interest Charge (SIC)
- From **1 July 2025**, **GIC and SIC charges incurred on unpaid or underpaid tax will *no longer be tax deductible**. Previously, businesses could offset these interest charges. ([blackwattletax.com.au](https://blackwattletax.com.au/tax/ato-gic-no-longer-deductible-2025/?utm_source=openai))
## Impact on Cash Flow & Profitability
- Without deduction, carrying tax debt becomes costlier—not just due to compounding interest, but because there is **no tax relief** for that interest. Businesses need to forecast for the full cost.
- Instant asset write-off provides a lever for investment decisions: purchases of eligible equipment should be pulled forward (or deferred) into the 2025-26 window if eligible. Timing matters.
## Strategic Tax Planning Before 30 June 2025
| Action | Benefit |
|---|---|
| Review planned capital purchases | Use write-off period fully—if purchase is timely, major tax reduction possible |
| Avoid tax debt where possible | Minimize exposure to non-deductible interest charges |
| Use payment plans early | ATO allows arrangements; starting early reduces GIC liability and potential defaults |
| Track and allocate usage days for assets | Deduction only for business portion—avoid disputes with ATO |
## Example Scenarios
- **Printer or equipment under $20,000**: A café owner purchasing a commercial oven for $18,000 before 30 June 2026 can deduct the whole cost immediately rather than depreciate over years.
- **Tax debt buildup**: A consultancy firm that delays BAS payments accumulates GIC (and possibly SIC). Without deduction, the interest is a pure out-of-pocket cost—no offset reduces taxable income.
## Compliance Tips & Common Mistakes to Avoid
- Make sure each asset is **first used or installed ready** for taxable use within the write-off window. Don’t just order it—complete installation and make it operational.
- For interest charges, separate out amounts incurred **before** 1 July 2025 (still deductible) from those after (non-deductible).
- Keep records of usage for mixed-use assets; incorrect allocation leads to adjustments and potential penalties.
- Consult with a registered tax professional about whether you can apply simplified depreciation vs. choosing to opt out, depending on your mix of assets.
## Looking Ahead: How to Use These Changes Proactively
- Perform cash flow analysis mid-year to check if purchases make sense in this fiscal year vs next.
- Update payroll and tax software systems to separate and track GIC/SIC expenses and non-deductible interest items.
- Use the instant write-off window to modernise tools, replace obsolete equipment, or make infrastructure upgrades that benefit long-term business operations.
**Bottom line**: Two changes here shift the cost-benefit calculation for many small businesses—for some, buying now and staying current on tax payments can lead to savings that outweigh traditional deferral strategies.