Treasury Laws Amendment (Tax Reform No. 2) Act 2026 (71 of 2026)

Schedule 2   $20,000 instant asset write-off for small business entities

Income Tax Assessment Act 1997

6   Subsection 328-205(4) (example)

Repeal the example, substitute:

Example: When Bria's minivan was allocated to her general small business pool for the 2023-24 income year, she estimated that it would be used 50% for her child care business and 50% for her own personal use. Due to increasing business, Bria estimates the business use of the minivan to be 70% for the 2024-25 year, and 90% for the 2025-26 year. She makes an adjustment under section 328-225 for both those years.

Bria sells the minivan for $20,000 at the start of the 2026-27 income year. She must now average the business use estimates for the minivan for the year it was allocated to the pool and the next 3 years to work out the taxable purpose proportion of its termination value. The average is worked out as follows:

· 50% (original estimate); plus

· 70% (2024-25 estimate); plus

· 90% (2025-26 estimate); plus

· 90% (no change on previous year);

= 300% ÷ 4 = 75%

The taxable purpose proportion of the minivan's termination value is, therefore:

75% of $20,000 = $15,000