The Biggest Tax Trap For 2025: Lessons From The Instant Asset Write-Off
During COVID-19, the government introduced the 100% Instant Asset Write-Off to stimulate the economy. The idea seemed straightforward and beneficial—allow businesses to immediately claim the full cost of assets like vehicles, machinery, and equipment, no matter the size of the purchase. Many business owners jumped at the opportunity to upgrade, expand, or invest in their operations, seeing it as a tax-saving goldmine.
But what seemed like a win at the time has evolved into a financial trap for many family businesses—a trap that’s about to bite hard in 2025.
Why you might not have seen the trap
Take Jeff, for example. In 2021, facing a significant and unexpected tax bill, his accountant suggested a solution: buy a new 79 Series Land Cruiser on finance and claim the 100% Write-Off. The tax savings would eliminate his immediate liability, and Jeff’s dream of owning a Cruiser became a reality. In 2022, Jeff’s business boomed. Seeing the ongoing benefits of the Write-Off, he purchased a 15-ton excavator, again claiming 100% of the cost and avoiding taxes for another year. Encouraged by his peers and the program’s impending end, Jeff made even more purchases in 2023, financing most and paying cash for some, leaving him tax-free for a third year.
The Catch-Up Reality Of 2024 And 2025
Fast forward to 2024, and Jeff’s accountant delivered shocking news:
- A $65,000 tax bill for 2024.
- A $32,000 shortfall in PAYG tax for 2025.
Jeff had misunderstood his tax position. While he’d been paying GST and staff PAYG through his BAS statements, his personal PAYG remained unpaid. By deferring tax through the Write-Off for three years, Jeff now owed a significant lump sum, compounded by ongoing loan repayments for the assets he financed.
Lessons For Business Owners
The biggest trap of the 100% Instant Asset Write-Off lies in its short-term relief versus long-term reality. Deductions are claimed upfront, but the financial commitments—loan repayments, balloon payments, and the ongoing impact on cash flow—stretch far into the future. When the tax-free years end, the liabilities hit hard, and businesses that didn’t plan ahead find themselves scrambling.
Ask yourself these key questions:
- Could this be happening in your business?
- Do you have customers, like Jeff, who might be facing cash flow issues because of similar decisions?
How To Avoid The Trap In 2025
Review Your Tax Position Regularly
Work closely with your accountant to forecast tax liabilities and ensure your PAYG obligations are up to date.
Check Your Financing Commitments
Understand how loan repayments and balloon payments will affect your cash flow in the coming years.
Communicate with Key Customers
If you suspect any of your major customers might be in Jeff’s position, review their credit terms carefully. Protecting your cash flow is as important as theirs.
Worried About Falling Into A Tax Trap?
At Blackburn ‘Prior, we understand the challenges of balancing tax-saving opportunities with long-term financial stability. If the Instant Asset Write-Off or similar tax decisions have left you unsure about your cash flow or tax liabilities, we’re here to help. Don’t let unexpected bills catch you off guard—reach out today, and let us guide you toward smarter, more sustainable financial strategies for your business.
