Instant Asset Write-Off Is Now Permanent — What It Means
The 2026 Federal Budget makes the $20,000 instant asset write-off permanent. Here's what small business owners with novated leases need to know.
The Albanese Government's 2026 Federal Budget includes $3.5 billion in new business tax relief, and one headline measure is making the $20,000 instant asset write-off permanent. Previously, small businesses had to wait for temporary annual extensions — a stop-start cycle that made planning genuinely difficult. According to the Treasury Ministers release [Source 1], the change is expected to deliver around $890 million in cash flow support over five years and cut compliance costs by roughly $32 million a year.
For sole traders and small business owners who also happen to be employees running a novated lease, this sits alongside a separate set of tax tools already available to them. The instant asset write-off and novated leasing solve different problems — but understanding both is part of running a tight tax position.
What this means for novated lease customers
If you're a PAYG employee, the instant asset write-off doesn't apply to your personal vehicle — it's a business deduction, not a salary packaging mechanism. What the budget announcement does signal, though, is that the Government is actively using the tax system to support investment and reduce cost pressures on working Australians and the businesses that employ them.
Novated leasing works on a different axis: it lets eligible employees pay for a vehicle — including running costs — from pre-tax salary, reducing the income tax you pay each fortnight. For employees of small businesses that are themselves benefiting from the instant asset write-off permanency, this budget may free up employer cash flow, which can make it easier for those businesses to offer competitive salary packaging arrangements in the first place.
If you're a sole trader or director who is also a PAYG employee of your own company, the two measures can potentially work in parallel — but the rules around which vehicle sits in which structure are specific. Speak to your accountant before assuming a vehicle qualifies under both.
Common questions
Can I use the $20,000 instant asset write-off on a car I'm novated leasing?
No. A novated lease is a personal salary packaging arrangement between you, your employer, and a finance provider. The instant asset write-off is a business tax deduction. The two are separate mechanisms and generally can't be applied to the same vehicle.
Does the 2026 Budget change FBT rules for novated leases?
Nothing in this particular announcement changes FBT treatment for novated leases. The EV FBT exemption introduced in 2022 remains in place under separate legislation. Always check the ATO website for the current FBT position.
I run a small business and want to offer novated leasing to my staff — does this budget help?
Indirectly, yes. Improved cash flow from the instant asset write-off permanency and other budget measures may make it easier to maintain or expand employee benefits. Novated leasing itself sits off your balance sheet and is arranged directly with an employee's lease provider.
Is the $20,000 instant asset write-off threshold now permanent at $20,000?
According to the Treasury Ministers release [Source 1], the Government is making the $20,000 threshold permanent. Confirm the final legislated amount with your accountant or the ATO, as budget announcements are subject to parliamentary passage.
What vehicles qualify for a novated lease regardless of this budget?
Any PAYG employee can potentially novate an eligible vehicle — new, used, or electric — subject to employer participation and lender criteria. The budget announcement doesn't change those requirements.