A new ute, a second excavator, a delivery van, a commercial oven, an upgraded production line — at some point most growing businesses need to fund an asset that’s too big for cash flow to absorb in one hit. The finance you choose to do it isn’t just about the rate. The structure changes how the asset sits on your books, how it’s taxed, and how the repayments affect your cash flow. Getting it right is worth a conversation before you sign.
This article explains the three most common equipment finance structures in Australia — chattel mortgage, finance lease, and hire purchase — and the factors that tend to point one way or another. The tax detail here is general; your accountant should confirm what applies to your business.
The three structures at a glance
| Structure | Who owns the asset | How repayments are typically treated |
| Chattel mortgage | You own it from settlement; lender holds a security interest | Claim depreciation + interest portion; GST on price claimable upfront (if registered) |
| Finance lease | The lender owns it; you lease it | Lease payments generally deductible as an operating expense |
| Hire purchase | You hire it, then own it at the end | Claim depreciation + interest charges |
None of these is universally best. The right fit depends on your cash flow, your tax position, whether you want to own the asset, and how long you’ll keep it.
Chattel mortgage — the popular choice for owners
A chattel mortgage is one of the most widely used structures for business equipment and vehicles in Australia, and it’s easy to see why. Your business takes ownership of the asset from settlement, while the lender registers a security interest until the loan is repaid. That day-one ownership is what unlocks the tax treatment many businesses are after.
Because you own the asset, you can generally:
- Claim depreciation on the asset (or an immediate deduction if it qualifies under the instant asset write-off — see below).
- Deduct the interest portion of your repayments.
- Claim the GST on the purchase price upfront in your next BAS, if you’re GST-registered.
Repayments are usually fixed over the term, which makes budgeting predictable. A residual (balloon) payment at the end can lower your monthly repayments — useful for cash flow, though it means a larger sum falls due at the end of the term.
The instant asset write-off — a real, dated trigger
This is one of the genuine timing considerations for businesses buying equipment right now. According to the ATO, for the 2025–26 income year, eligible small businesses (aggregated turnover under $10 million, using simplified depreciation) can immediately deduct the full cost of eligible assets costing less than $20,000 each — provided the asset is first used or installed ready for use between 1 July 2025 and 30 June 2026.
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Two things worth knowing: 1. It’s per asset. Two items at $18,000 each can each qualify independently — not a single $20,000 total. 2. Financing still counts. Because a chattel mortgage gives you ownership from settlement, a financed asset can qualify for the write-off in the same way a cash purchase does — the trigger is the asset being used or installed ready for use before the deadline, not how you paid for it. |
The $20,000 threshold is currently legislated to drop to $1,000 from 1 July 2026, although the government has indicated an intention to make a $20,000 threshold permanent from 2026–27 (Asset Finance Australia / Switchboard Finance, 2026). Because the position can change, confirm the current threshold and your eligibility with your accountant before relying on it. This is a tax matter, not credit advice.
Note for vehicles: passenger cars are subject to a separate car cost limit (around $69,674 for 2025–26, indexed), while commercial vehicles such as trucks, vans, and one-tonne-plus utes generally aren’t capped the same way. Your accountant can confirm where your vehicle sits.
Finance lease — when you’d rather not own it
With a finance lease, the lender owns the asset and you lease it for an agreed term, with lease payments generally treated as a deductible operating expense. This can suit businesses that prefer to keep assets off their balance sheet, want to upgrade equipment regularly, or don’t need to own the asset at the end. The trade-off is that you don’t get the ownership-based tax benefits — importantly, leased assets generally don’t qualify for the instant asset write-off.
Hire purchase — a middle path
Under hire purchase, you hire the asset and pay it off over time, taking ownership once the final payment is made. You can typically claim depreciation and the interest charges along the way. It sits between a chattel mortgage and a lease, and it still appears in some industries, though chattel mortgages have become the more common choice for businesses wanting ownership from day one.
Questions to take into the conversation
- Do I want to own this asset, or would I rather upgrade it in a few years?
- How long will the asset realistically be useful to my business?
- Is upfront GST recovery or a lower monthly repayment more valuable to my cash flow right now?
- Could the instant asset write-off apply — and does my timing work for the current deadline?
- What does my accountant say about the tax treatment for my specific situation?
Your call — and how to make it
The structure that suits your next purchase comes down to ownership, tax, and cash flow — and those three rarely point in exactly the same direction. The value of a broker here is access and comparison: we work with 70+ lenders, including specialists in equipment and asset finance, so you can see what’s available across the market rather than taking the first offer in front of you. We unlock the options; you and your accountant make the call.
| Equipment upgrade on the horizon?
Let’s find the finance structure that fits your business and your timing. Free, no obligation call 1300 286 562. |
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