John Pierre Saliba
Director, OverdraftMe | ACL 511092
Specialist business finance broker since 2017, $700M+ facilitated for Australian SMEs. MFAA Member, AFCA Member.
By John Pierre Saliba · April 2026 · OverdraftMe
Last reviewed: 30 October 2026 · Written by John Pierre Saliba, Director, OverdraftMe
Funding an asset that qualifies for the instant asset write-off with a business overdraft can give you two deductions: the asset cost in the year it is installed, and the overdraft interest and fees as they are incurred. The $20,000 threshold applied to assets installed by 30 June 2026; confirm the current threshold with your accountant first.
The $20,000 instant asset write-off applied to assets first used or installed ready for use by 30 June 2026 for businesses with turnover under $10 million, and the same double-deduction logic applies to whatever threshold is in force when you buy. It means you can buy a business asset under $20,000, install it, and claim the full cost as a deduction in the year of purchase - no depreciation over multiple years.
Here's what most people miss: if you fund that purchase with a business overdraft, the interest on the overdraft is ALSO tax deductible. Two deductions from one purchase.
Buy a $19,999 asset inside the write-off window. Claim the $19,999 as an instant deduction. Pay the overdraft interest as a separate deduction. At the 25% base rate entity tax rate, you save ~$5,000 in tax on the asset alone - plus the ongoing interest deduction.
Without an overdraft, buying a $20K asset means $20K leaving your bank account immediately. That's a cash flow hit. With an overdraft, the $20K stays available as working capital while you repay gradually. You get the tax deduction NOW and spread the cash outflow over months.
An electrical contractor buys a $18,000 van fitout in June 2026, funded from their business overdraft at 18% p.a.
| Item | Amount | Tax deductible? |
|---|---|---|
| Van fitout (instant asset write-off) | $18,000 | YES - full deduction in 2025-26 |
| Overdraft interest (repaid over 6 months) | ~$970 | YES - deductible as incurred |
| Overdraft line fee (6 months) | ~$135 | YES - deductible |
| Total deductions | $19,105 | Tax saving at 25%: ~$4,776 |
For the 2025-26 year the asset had to be first used or installed ready for use by 30 June 2026. For 2026-27 the ATO page (updated 28 August 2026) still lists a $20,000 limit for businesses with aggregated turnover under $10 million, applying to assets first used or installed on or after 1 July 2023 with no end date, so a purchase installed by 30 June 2027 sits inside the current rule. Check the ATO page before relying on it, because the limit has changed several times. The double-deduction mechanics do not change from year to year: the asset is deducted under whatever write-off rule applies, and the overdraft interest is deducted as incurred. If you are planning a purchase, get your overdraft approved first so the funds are there when the right asset comes up, rather than scrambling at EOFY.
A cafe owner needs a $19,000 commercial oven. The deduction for the oven is identical in all three cases. The difference is what the purchase does to working capital and what the finance costs.
| Funding option | Cash leaving the account on day one | Finance cost | Working capital preserved |
|---|---|---|---|
| Pay cash | $19,000 | $0 | None: the whole amount is gone until the oven earns it back |
| Draw on a business overdraft, repay over 6 months | $0 (repaid in monthly instalments from trade) | Interest about $1,000 on a declining balance, plus the line fee on the limit, both deductible | $19,000 stays available, and the limit resets as it is repaid |
| 12-month unsecured business loan | $0 (fixed weekly repayments) | Interest about $1,900 on a declining balance, deductible | $19,000 preserved, but repayments run for the full year with no redraw |
The overdraft is cheapest when you can repay inside a few months. If repayment will take a year or more, the fixed-term loan usually costs less than leaving an overdraft fully drawn, because overdraft rates sit at the revolving end of the 14.55% to 25% p.a. range. Compare the two in our guide to working capital loans, or see what you qualify for with an unsecured business overdraft.
Generally yes, because they are two different deductions. The asset cost is deducted under the instant asset write-off in the year it is first used or installed ready for use, and the interest and fees on a business overdraft used to buy it are deducted as business expenses when they are incurred. The borrowing must be for a business purpose, and your accountant should confirm your position.
The write-off turns on when the asset is first used or installed ready for use, not on how it was funded. Buying it with cash, a business overdraft or a business loan does not change the deduction itself. What changes is cash flow: an overdraft lets the business keep its working capital while the asset starts earning.
An asset at or above the threshold is not written off at once; it is depreciated over time under the normal small business rules instead. The overdraft interest used to buy it is still deductible as incurred. Ask your accountant how the asset will be treated before you commit, and keep the overdraft limit sized to the purchase rather than the threshold.
Talk to your accountant about your specific situation. This is general information, not tax advice. The instant asset write-off rules and overdraft deductibility depend on your individual circumstances.
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