Tools of the Trade – Depreciation vs Instant Asset Write-Off for Small Biz

Updated: 12/09/25 • Reviewed by: GoTax Registered Tax Agent

Bought tools, a laptop, or gear for work? How you claim it depends on whether you’re an individual employee or an ABN holder. Employees can only use depreciation, while small businesses and ABN holders may qualify for the instant asset write-off (if under the 2025 threshold). Here’s what you need to know.

The Derek Take – Know Which Side You’re On

Too many people get this wrong. Employees think they can write off a new MacBook instantly. Nope — depreciation only. Small business owners with an ABN? That’s where instant asset write-off comes into play.

Get this wrong and the ATO will shut you down faster than your drill battery.

If You’re an Employee (No ABN)

• You can claim depreciation on work-related items over their “effective life.”

• Applies to things like laptops, phones, tools of trade, protective gear.

• If the item costs $300 or less, you can claim it instantly.

• Over $300 → depreciate.

Example:
Jess is an employee accountant. She buys a $1,200 laptop used 80% for work. Effective life: 3 years. She claims $320 in the first year, then smaller amounts over the next two.

If You’re an ABN Holder (Small Business, Freelancer, Tradie, Rideshare)

• You may qualify for the instant asset write-off for eligible assets under the threshold (it is $20,000 in 2025).

• You can claim the full cost in the year of purchase.

• Assets above the threshold must be depreciated.

Example:
Mick the carpenter (ABN registered) buys a $4,000 table saw. Under the instant asset write-off, he claims the full $4,000 this year. At a 30% tax rate, that’s $1,200 tax saved immediately.

Side-by-Side Comparison

The Top 5 Mistakes with Tools & Assets

1. Employees claiming instant write-off. Doesn’t exist for individuals.

2. Claiming the full cost when part is personal. That gaming laptop? Only claim the work %.

3. Forgetting GST adjustments. ABN holders must claim net of GST if registered.

4. Depreciating items under $300. Waste of time — you can claim those instantly.

5. Trying to split assets. The ATO won’t let you break up one big item to sneak under the cap.

Gotax Real-World Story

Sam the electrician (ABN holder) bought $18,000 worth of gear in June. He used the instant write-off and saved $5,400 in tax.
His mate Alex, an employee sparky, bought a $1,500 drill kit and tried to claim it all. The ATO shut it down — depreciation only. Alex will claim it over 4 years instead.

Tools & Tech You Might Be Missing

• Employees: laptops, phones, calculators, uniforms, protective gear, small tools under $300.

• ABN holders: machinery, vehicles (within limits), IT equipment, business furniture.

If you’ve spent it for work, the rules decide when you claim — instantly or over time.

Tools to Make It Easy

• Deduction Grabber – capture receipts instantly.

• eCashBooks (www.ecashbooks.com.au) – track asset purchases and depreciation schedules.

• GoTax Online – prompts you to pick the right method for your situation.

FAQs – Depreciation & Write-Offs (12 Questions)

1. Can employees use instant asset write-off?
   No. Only ABN holders. Employees use depreciation.

2. What’s the instant asset write-off threshold in 2025?
   Expected around $20,000, but check the ATO’s update.

3. What’s the $300 rule for employees?
   Any work-related item ≤$300 can be claimed instantly.

4. Can ABN holders claim second-hand assets?
   Yes, if they meet the criteria.

5. Do I need to use the asset before 30 June?
   Yes. Buy and use in the same year to claim.

6. What about vehicles?
   Subject to car cost limits. Often depreciated.

7. Can employees claim tools like tradies?
   Yes, but depreciation rules apply if over $300.

8. Can I split a $25,000 asset into parts under $20k?
   No. The ATO looks at the whole item.

9. What about pooled depreciation?
   Available for ABN holders under small business rules.

10. Can I switch methods later?
    No. Once chosen, you stick with it.

11. Does financing matter?
    No. It’s based on purchase price, not how you paid.

12. What if part personal, part work?
    Claim only the business-use %.

Related Reading

• Essential records to keep: https://www.gotax.com.au/blog/essential-tax-records-what-to-keep

• Starting a business: https://www.gotax.com.au/blog/starting-a-business-2023-gotax

• Car expenses guide 2025: https://www.gotax.com.au/blog/claim-car-expenses-2025

Browse more in the GoTax Online Library: https://www.gotax.com.au/blog

Quick Checklist

• Employees: ≤$300 instantly, >$300 depreciate
• ABN holders: Instant write-off under threshold, depreciate if over
• Always apportion work vs personal use
• Keep receipts for 5 years
• Claim through GoTax Online correctly

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