AU Equipment Finance Structures Explained
Chattel mortgage, lease, hire purchase, rental — they all sound the same but the tax treatment is very different. Quick guide.
Chattel Mortgage
Most common. You own the asset. GST is claimable up front. You depreciate the asset and claim interest. Best when you are profitable and want the depreciation deduction.
Finance Lease
Lender owns the asset, you have right to use. Whole repayment is tax deductible. GST is claimed on each repayment, not up front. Suits businesses with lumpy GST positions.
Operating Lease / Rental
True off balance sheet rental. You return the asset at end of term. Best for businesses that always want to be in late model gear and don't want residual risk.
When a balloon makes sense
Balloons reduce your monthly repayment but increase total interest cost. Use them when cash flow is tight in early years and the machine will hold residual value (Euro brands generally do).