When financing business equipment or vehicles, the three main options are a chattel mortgage, a lease and hire purchase – and the right one depends on your tax position and cash flow.
They differ in who owns the asset, how GST is treated, and how the repayments and deductions work. Choosing well can save your business real money at tax time.
As your Perth broker, The Finance Yogi compares all three and matches the structure to your business.
With a chattel mortgage, your business owns the asset from day one and the lender simply holds security over it. You can usually claim the GST on the purchase in your next Business Activity Statement, and claim depreciation and interest as deductions.
A lease means the financier owns the asset and your business rents it, with the full repayment often deductible. Hire purchase sits in between – you hire the asset and own it outright after the final payment.
Each has different tax and ownership outcomes, so the best choice is the one that suits how your business accounts for things.
There is no single best structure – it depends on your GST position, your accounting method and your cash flow.
We compare all three with your situation in mind, and work alongside your accountant so the finance is as tax-efficient as possible.
Your accounting method – cash or accruals – affects when you can claim GST and deductions, which is why the structures suit different businesses.
For a broader view of financing business assets, see our how equipment finance works guide.
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A chattel mortgage is popular because you can claim the GST on the asset upfront, then claim depreciation and the interest portion of repayments as deductions over time.
A lease can suit businesses that prefer to claim the full repayment as a rental expense. Eligible assets may also qualify for the instant asset write-off, which lets you deduct the cost of assets under the threshold immediately.
Important: tax treatment is specific to your business, so always confirm with your accountant. We explain the options on our equipment finance broker Perth page.
All three structures can fund a wide range of business assets – vehicles, trucks, machinery, tools, technology and fit-outs – whether new or quality used.
The term is usually matched to the working life of the asset, so you are not still paying for equipment long after it has stopped earning for the business.
We arrange finance for most business assets. See the full service on our equipment finance broker Perth page.
The best structure depends on your GST registration, your accounting method, and whether you want to own the asset or simply use it.
We review your business, compare chattel mortgage, lease and hire purchase on cost and tax, and recommend the option that leaves your business best off – ideally with your accountant’s input.
Once the structure is chosen, we arrange approval and settlement with the supplier. For the full picture, read our complete equipment and asset finance guide, or explore our finance services.
Book a free, no-obligation chat and we will match the finance to your tax position and cash flow.
Source: business finance guidance from business.gov.au, and depreciation and write-off information from the ATO. Tax is specific – confirm with your accountant.
