Financing Factory Plant Too Big for the Write-Off
Plant Above the Write-Off (2026) | Switchboard Finance
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Financing Factory Plant Too Big for the Write-Off
The instant asset write-off headline grabs attention every June, but most factory plant costs more than it covers. When the write-off does not reach big plant, the real question is how the equipment is financed and how it depreciates through the pool.
Quick Answer
Most factory plant costs more than the instant asset write-off allows, so it cannot be written off in one hit. A chattel mortgage funds the purchase and the asset depreciates through the small business pool instead.
Why the write-off headline does not reach big plant
For most manufacturers, the write-off headline does not reach big plant. The instant asset write-off, announced in the 2026-27 Federal Budget to become a permanent $20,000 setting from 1 July 2026 but not yet law, applies on a per-asset basis. A press brake, a CNC machine or a production line almost always costs well above that figure, so the write-off simply does not apply to the asset itself.
That matters because the June conversation in most workshops starts with the write-off and stops there. What lenders actually look at first is rarely the deduction. It is the cost of the plant, the cash flow that services it, and the way the asset depreciates over the years you actually run it.
The threshold settings are worth stating plainly so the wrapper is clear. The $20,000 instant asset write-off is announced as permanent from 1 July 2026 for small business entities, indicative and not yet law; without the supporting legislation passing Parliament it reverts to around $1,000 from that date, also indicative. Either way, a six or seven figure machine sits above the write-off threshold and is treated differently.
Instant write-off versus the small business pool
Once an asset costs more than the threshold, it does not vanish from your tax position. It depreciates through the pool, not in one hit. Eligible plant above the write-off goes into the small business pool and is depreciated at a set rate each year rather than deducted in full. Pool depreciation typically runs around 15 percent in the first year then around 30 percent thereafter for the 2025-26 income year under current ATO small business pool rules, indicative and subject to your accountant.
The point of the table is not the exact percentages, which your accountant confirms against your trading year. It is the shape of the outcome. A sub-threshold tool can be written off in the year you buy it. A production machine spreads its deduction over the time you own it, which means the tax benefit is real but gradual, and the financing decision sits separate from it. The published figures here are framed as announced policy settings, not as settled fact, because the supporting legislation has not yet passed.
How a chattel mortgage funds plant above the threshold
Because the deduction is gradual, the funding question stands on its own. A chattel mortgage is the structure most manufacturers reach for: the business owns the plant from settlement while the lender holds security over the asset until the loan is repaid. You get the equipment running on the floor while the cost is spread over a fixed term, and the asset depreciates through the pool in the background.
Where chattel fits cleanly
- Plant whose cost sits above the write-off threshold
- A business with steady cash flow to service the term
- Equipment you intend to own and run for years
- A clear purpose for the asset on the workshop floor
Where it gets tricky
- Treating the write-off as the reason to buy big plant
- Stretching a balloon you cannot settle at term end
- Cash flow that cannot carry the repayment in quiet months
- Buying ahead of need just to beat 30 June
A balloon payment can lower the monthly repayment by deferring part of the cost to the end of the term, which helps cash flow but leaves a lump sum to settle or refinance later. For lower-document scenarios, a low doc asset finance pathway can fund the same plant on lighter paperwork. The chattel mortgage applies from settlement, so the structure and the depreciation run together from day one. The right structure depends on how long you plan to keep the machine and how the repayment sits against your trading cycle.
What the credit team sizes first
What the credit team sizes first is not the write-off. It is whether the business cash flow services the repayment and whether the asset holds value as security. A chattel mortgage is assessed on the trading position and the plant itself, which is why a manufacturer with steady throughput can fund a machine well above any write-off threshold without the deduction entering the decision at all.
This is the practitioner read worth carrying into June: the deduction profile is a question for your accountant, and the financing is a question for your broker. They interact, but they are not the same decision. The manufacturing loan pack sets out the documents a lender looks for, and the way a lender reads the security differs by asset type.
Timing the purchase around EOFY
Timing a plant purchase around EOFY is a strategy window for manufacturers, not a deadline race. Because the plant depreciates through the pool whichever side of 30 June it settles, the date itself rarely changes the structure. What changes is the deduction profile across your trading years and the lead time on the asset, which on bespoke machinery can be long.
If you are weighing the lease, rental and chattel options for the same machine, the equipment lease versus rental versus chattel comparison walks through the trade-offs, and the EOFY chattel mortgage timing guide covers the calendar question in more detail. The Budget settings behind the write-off are published on the Federal Budget site, framed here as announced and not yet law.
Most factory plant costs more than the instant asset write-off allows, so it depreciates through the small business pool rather than in one hit, and the financing decision stands separate from the deduction. A chattel mortgage funds the asset from settlement, assessed on cash flow and the plant itself, while the pool handles the tax position gradually in the background.
Key takeaway: For plant above the write-off threshold, finance the machine for how you run it, and let your accountant handle the pooled deduction separately.Frequently Asked Questions
Equipment that costs more than the instant asset write-off threshold cannot be written off in full in the year of purchase. The instant asset write-off, announced to become a permanent $20,000 setting from 1 July 2026 but not yet law, applies per asset, so above that figure the plant depreciates through the small business pool rather than in one hit.
Most factory plant sits above the threshold, which is why a chattel mortgage is the more relevant question than the write-off.
A chattel mortgage works by giving the business ownership of the plant from settlement while the lender holds security over the asset until the loan is repaid. The structure is assessed on business cash flow and the asset itself, which suits plant whose cost sits above the write-off threshold.
You can read more in our chattel mortgage glossary entry.
The small business depreciation pool is a simplified method that groups eligible business assets and depreciates them at a set rate rather than writing each off in full. Pool depreciation typically runs around 15 percent in the first year then around 30 percent thereafter for the 2025-26 income year, indicative and subject to your accountant.
Big plant above the write-off threshold usually depreciates through the pool, not in one hit, which is why the chattel mortgage question matters more than the deduction.
A balloon payment on a plant chattel mortgage lowers the monthly repayment by deferring part of the cost to the end of the term, which can help cash flow but leaves a lump sum to settle or refinance later. Whether it suits depends on how long you plan to keep the plant and your cash flow over the term.
See our balloon payment glossary entry and consider how the equipment lease versus rental versus chattel comparison plays out for your asset.
Buying factory plant before or after 30 June is a strategy-window decision rather than a deadline race for most manufacturers, because plant above the write-off threshold depreciates through the pool whichever side of EOFY it settles. The deduction profile, your trading year and the lead time on the asset matter more than the date itself.
A chattel mortgage can be arranged either side, so speak to a broker about how the timing reads for your file.
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