Equipment tax rules for a tree business in Australia

This page reports what the official source says. It is not legal advice: ask the office named here. The sources are three Acts on the Federal Register of Legislation and the business.gov.au tax deductions page, all read on October 9, 2026. The wider comparison is on the equipment tax rules page. The Australian Taxation Office publishes the effective life tables and its own guidance on these rules; this page does not report them.

The general rule: decline in value

Section 40-25 of the Income Tax Assessment Act 1997 says a taxpayer can deduct an amount equal to the decline in value for an income year of a depreciating asset held at any time during the year. The deduction is reduced by the part of the decline attributable to use for a purpose other than a taxable purpose. The Act gives an example of an asset used 30 per cent privately that declines AU$1,000 in the year: the deduction is reduced by AU$300.

Section 40-30 says a depreciating asset has a limited effective life and can reasonably be expected to decline in value over the time it is used. It excludes land, trading stock and most intangible assets. Section 40-95 says the taxpayer must choose either an effective life determined by the Commissioner of Taxation or their own estimate of effective life. Section 40-70 sets a diminishing value method with a 150 per cent factor, and section 40-72 sets one with a 200 per cent factor for an asset the taxpayer started to hold on or after May 10, 2006.

The small business route

Subdivision 328-D lets a small business entity choose to work out deductions for depreciating assets under it instead of Division 40. Under section 328-110, a business is a small business entity for an income year if it carries on a business and its aggregated turnover for the income year before was less than AU$10 million, or is likely to be less than AU$10 million for the income year itself. Section 328-180 lets the business deduct the taxable purpose proportion of the adjustable value of an asset in the year it starts to use it, if its cost is under a threshold. The threshold printed in the Act is AU$1,000. Assets not written off that way go into a general small business pool (section 328-185), and section 328-190 sets the deduction on each asset in its first year at 15 per cent of the taxable purpose proportion of its adjustable value.

Subsection 328-175(10) says that once a business has chosen the Subdivision, it cannot choose it again until at least 5 years after the first later year it qualified but did not choose it, subject to the transitional rules below.

Thresholds that replace AU$1,000

Section 328-180 of the Income Tax (Transitional Provisions) Act 1997 is headed "Increased access to accelerated depreciation from 12 May 2015 to 30 June 2026". It says the AU$1,000 limit in the 1997 Act is read as another amount for assets first acquired at or after 7:30 pm on May 12, 2015, depending on when the asset was first used or installed ready for use for a taxable purpose.

First used or installed ready for use	Threshold in the section
From May 12, 2015 to before January 29, 2019	AU$20,000
From January 29, 2019 to before April 2, 2019	AU$25,000
From April 2, 2019 to before March 12, 2020	AU$30,000
From March 12, 2020 to June 30, 2021	AU$150,000
From July 1, 2023 to June 30, 2026	AU$20,000
On or after July 1, 2026	AU$20,000, written into section 328-180(1)(b) of the 1997 Act by Schedule 2 to the Treasury Laws Amendment (Tax Reform No. 2) Act 2026; the Schedule commenced on October 1, 2026

Section 328-181 of the same Act is headed "Full expensing, 2020 budget time to 30 June 2023" and tells the reader to disregard the AU$1,000 limit in subsection 328-180(1)(b) of the 1997 Act for the assets it covers. The compilation of the Transitional Provisions Act read is dated July 1, 2026, and the 1997 Act compilation read is dated August 27, 2026 and prints AU$1,000 with a note that the threshold may be affected by those transitional sections. That compilation was in force from August 27, 2026 to before October 1, 2026, so it does not include the Schedule 2 amendment, which replaces AU$1,000 with AU$20,000 in section 328-180 and in sections 328-170, 328-210, 328-215 and 328-250. Item 15 of the Schedule applies the new figure in section 328-180 to an asset first used, or first installed ready for use, for a taxable purpose on or after July 1, 2026, and the Schedule also moves the end year in the heading of the Transitional Provisions section from 2026 to 2027.

Records and mixed use

business.gov.au lists depreciating assets and other capital expenses among the costs that may be claimed as deductions. It says an expense must relate directly to earning income and be for the business, not private use, and that only the business portion of a mixed use expense can be claimed. It says records must be in writing, in English or readily convertible to English, and kept for five years, although some records need to be kept longer.