returnoninvestment.auWhat spending brings back to a business
Notch 3 of 6 · The load
The real cost of an asset
An asset costs a business more than its price. The ATO counts what was paid plus the cost of transporting, installing and improving it, leaves out GST the business can claim back in full, and allows a deduction only for the share used to earn assessable income. That cost is usually claimed over the asset’s effective life, although eligible small businesses can immediately deduct the business portion of an asset costing less than $20,000 (as at October 2026).
A guide published by Dotto. General information, not tax advice. The ATO’s pages, listed at the foot of this page, set out the rules in full; ATO pages updated on 28 August 2026 were checked for this guide.
- Goes in
- Price, transport, installation, improvements
- Comes off
- GST credits and any private use
- The reading
- The cost a return is measured against
What goes in the load
The ATO’s depreciation pages set out what an asset’s cost includes, and what comes off it before a deduction is worked out.
| Part | How the ATO treats it |
|---|---|
| The price paid | In: the amount paid for the asset |
| Transport and installation | In: what is spent transporting the asset and installing it in position |
| Improvements | In: what is spent improving it |
| GST and private use | Out: GST the business can claim back as a credit, and any share of use that is private rather than for earning assessable income |
For a return on investment, the load is this whole cost, not the sticker price: that is this guide’s reading, and it follows from the ATO’s own definition. Running costs are a separate weight. energy.gov.au, for one, lists changes in maintenance costs, downtime and training among the things to weigh beside an upgrade’s energy saving.
When the cost lands: one asset, two timelines
Under the general depreciation rules, an asset’s cost is claimed over its effective life, and the ATO describes two methods. The prime cost method assumes the value falls evenly across the effective life; the diminishing value method assumes it falls faster in the early years.
The ATO’s worked example is an $80,000 asset used only for business, bought on the opening day of the income year, with a 5-year effective life.
Prime cost: the same claim each year
20% of the cost in each of the five years. The ATO’s figures.
Diminishing value: more at the start
40% of the value not yet written off, each year. The ATO gives the first four years and says the claims continue until the value reaches zero.
Both methods write off the same $80,000; what changes is when the deductions arrive. For a return figure this matters in a quieter way. A single year’s profit carries only that year’s depreciation, which Business Queensland lists among fixed expenses, while the cost of the investment is the whole outlay. A yearly return and a return over the asset’s life are therefore different sums, and it helps to know which one a figure is. (This guide’s reading.)
Writing it off at once, as at October 2026
An eligible small business can deduct the business portion of an asset in the year it is first used or installed ready for use, instead of over its effective life, when the whole cost is below the limit; for assets first used or installed ready for use on or after 1 July 2023 the ATO gives that limit as $20,000. For a return figure this changes when the deduction arrives, not what the asset cost (this guide’s reading). The ATO’s instant asset write-off page sets out who is eligible.
Owning or leasing
Leasing turns the cost into regular payments instead of one outlay; business.gov.au compares the two on its page about leasing or buying vehicles and equipment.