AASB 16 in Plain Words, and Who It Actually Affects
Last updated: September 2026
AASB 16 is the Australian accounting standard for how leases are recorded.
It puts most leases on the balance sheet as a right of use asset with a matching liability.
Before it, an operating lease sat off the balance sheet as a rental expense.
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Quick formHow the rule changed things
Before it, an operating lease was largely a monthly expense in the profit and loss statement. The obligation existed, but it did not show as an asset and a liability on the balance sheet.
Under AASB 16 a lessee generally recognises two things. A right of use asset, meaning the value of using the equipment for the term, and a lease liability for the payments still owed.
The monthly charge then splits into depreciation on that asset and interest on that liability, instead of a single rental line.
The cash paid does not change. Only where it appears in the accounts does.
Applying it, and being exempt from it
It applies to entities preparing general purpose financial statements under Australian Accounting Standards. That is listed companies, large proprietary companies and many not for profits.
A small business preparing special purpose accounts for its own use and its tax return is usually not applying AASB 16 at all.
The standard also has recognition exemptions, commonly applied to short term leases of twelve months or less and to leases of low value assets.
Whether a particular printer falls inside a low value exemption is a judgement for the entity and its auditor, not something a supplier can decide.
It can matter even when it does not apply to you
Where a business has bank covenants measured on gearing or on assets, moving leases onto the balance sheet changes those ratios.
Finance teams in larger organisations often ask about lease structure for exactly this reason, and the answer affects which arrangement they prefer.
For an office of five people preparing special purpose accounts, none of this is likely to arise.
This page is general information about how these arrangements are commonly treated in Australia. It is not tax advice. Your structure, your finance arrangement and the year all change the answer, so confirm your own position with your accountant.
Common questions
What is AASB 16 in simple terms?
It is the Australian accounting standard for how leases are recorded.
Most leases must be shown on the balance sheet as a right of use asset with a matching liability, rather than as a monthly rental expense alone.
Does AASB 16 apply to my small business printer lease?
Usually not.
It applies to entities preparing general purpose financial statements under Australian Accounting Standards.
A small business preparing special purpose accounts for its own use and its tax return is generally not applying it.
Does AASB 16 change how much I pay?
No.
The cash paid over the term is unchanged.
What changes is where the amounts appear in the accounts, with a single rental line replaced by depreciation on a right of use asset and interest on a lease liability.
Are short or low value leases exempt from AASB 16?
The standard includes recognition exemptions commonly applied to leases of twelve months or less and to low value assets.
Whether a specific device qualifies is a judgement for the entity and its auditor.