Tools & Equipment — Australia Tax Rules

Claim the cost of tools and equipment using instant asset write-off or depreciation.

Claimable: Fully claimable · Tax authority: ATO

ATO Rules

• Small business entities (turnover under $10 million) can instantly deduct tools and equipment costing less than A$20,000 per item (2024/25).
• Larger items are depreciated using the ATO's effective life rates or the simplified depreciation pool for small businesses.
• If equipment has personal use, claim only the work-related proportion.
• Hire and lease costs for equipment are fully deductible as operating expenses in the year incurred.
• Replacement of like-for-like tools under A$300 can be deducted immediately regardless of business size.
• The ATO's simplified depreciation rules allow small businesses to pool depreciable assets and write off the pool balance when it falls below A$20,000.

Limits

Instant write-off: A$20,000 per asset for small businesses (2024/25). For others: under A$300 immediate deduction; over A$300 depreciate over effective life.

Worked Example

Tom is a self-employed carpenter. He buys $580 of hand tools (instant deduction as a small business), a $3,500 table saw (instant deduction under A$20,000), and hires a generator for $450 per week for 3 weeks ($1,350 fully expensed). Total deductible: $580 + $3,500 + $1,350 = $5,430.

Record Keeping

• Keep purchase receipts and tax invoices for all tool and equipment purchases
• Maintain a depreciation schedule or pooling schedule for items over the write-off threshold
• Record hire agreements, rental invoices, and the business purpose
• Note the work-use percentage for dual-use items
• Keep records for 5 years after the deduction is claimed

Frequently Asked Questions

What is the instant asset write-off threshold for 2024/25?

Small businesses with aggregated turnover under $10 million can instantly deduct eligible assets costing less than A$20,000 each. The asset must be first used or installed ready for use before 30 June 2025. The threshold applies per asset.

Can I claim power tools?

Yes. All tools of trade are deductible. Under A$300 items can be claimed immediately regardless of business size. Larger tools go through instant write-off (small businesses) or depreciation (larger businesses).

What about renting equipment?

Rental and hire costs are fully deductible as operating expenses — no depreciation calculation needed. Keep the hire invoices and the purpose of hire.

What is the ATO's effective life for common tools?

The ATO publishes effective life determinations for common assets. Power tools: 5–7 years. Hand tools: 5 years. Electronic testing equipment: 4–5 years. Machinery: varies by type. Using the actual effective life gives a higher annual deduction than declining balance — small businesses should check the simplified depreciation pool rules first.