What's the difference between a chattel mortgage and a hire purchase?

Chattel mortgage: you own the asset from day one, and it's registered in your name. The lender has a charge (mortgage) over it. Hire purchase: the lender owns the asset until all payments (including any residual) are made. Both allow GST claiming and depreciation. Chattel mortgage is more common for vehicles; hire purchase for other equipment.

Can I claim the Instant Asset Write-Off?

From 1 July 2026, the Instant Asset Write-Off is a permanent feature of the tax system (no longer an annually-renewed budget measure): businesses with aggregated turnover under $10 million can immediately deduct the full cost of eligible assets costing under $20,000 each, rather than depreciating them over several years. This applies to the TOTAL cost of the asset, regardless of the finance method used. Consult your accountant to confirm eligibility for your specific asset.

Should I lease or buy equipment?

Buy (chattel mortgage) if: you want to own the asset, claim GST upfront, and build equity. Lease if: you prefer lower payments, plan to upgrade frequently, or want 100% tax-deductible payments. Lease is also better if the equipment may become obsolete quickly (e.g., technology).

§ Tool · tier 1 · independent

Equipment Finance Calculator.

Calculate repayments for equipment finance, chattel mortgage, and hire purchase. Compare leasing vs buying for tax and cash flow impact.

CalculatorFree, no signupOn-deviceupd August 2026

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Equipment finance lets businesses acquire vehicles, machinery, technology, and other assets without paying the full cost upfront. In Australia, the main options are chattel mortgage (you own it, claim GST upfront), hire purchase (you own it after final payment), finance lease (lender owns it, you lease it), and operating lease (pure rental). Each has different tax, GST, depreciation, and cash flow implications. This calculator compares them so you can choose the best structure for your business.

§ Worked examples

Real-world scenarios

Work Ute — Chattel Mortgage

A tradie buys a $65,000 (ex-GST) Toyota HiLux via chattel mortgage at 6.9% over 5 years, 20% residual.

Financed amount: $65,000. Monthly repayment: $1,102. Residual (balloon): $13,000 due at end. Total of repayments: $66,118; total paid including the balloon: $79,118. GST claimed upfront: $6,500. Annual depreciation deduction (straight-line over 5 years): $13,000. After-tax cost (25% company tax rate): significantly reduced once interest, depreciation, and the GST credit are factored in.

Restaurant Equipment — Finance Lease

A restaurant leases $120,000 of kitchen equipment via finance lease at 8.5% over 7 years, no residual.

Monthly payment: $1,900. Total paid: $159,632. Total interest: $39,632. As a finance lease, the full $1,900/month is 100% tax-deductible. At 25% company tax, the after-tax cost is ~$1,425/month. No GST claimed upfront, but GST is embedded in the payments.

§ FAQ

Questions Australians ask

§ Glossary

Plain-English definitions

Chattel Mortgage

A finance arrangement where you own the asset from day one, with the lender holding a mortgage over it as security. You claim GST upfront and depreciate the asset.

Residual Value (Balloon)

A final lump-sum payment at the end of the finance term. Setting a residual reduces monthly repayments but means you owe a large amount at the end.

Finance Lease

An arrangement where the lender owns the asset and leases it to you. Payments are 100% tax-deductible. At the end, you can purchase the asset for a nominal amount, re-lease, or return it.

Instant Asset Write-Off

A permanent tax feature (from 1 July 2026) letting businesses with turnover under $10 million immediately deduct the full cost of eligible assets under $20,000 in the year of purchase, rather than depreciating over several years.

§ Pair it with

Related tools

Business Loan Calculator

Compare equipment finance with a standard business loan.

Break Even Calculator

Include equipment finance repayments in your break-even analysis.

GST Calculator

Calculate GST on equipment purchases for BAS claims.

How to use

01Enter the equipment cost (GST-exclusive).
02Add any deposit or trade-in value.
03Input the interest rate offered.
04Choose the finance term.
05Select the finance type to compare tax treatment.
06Optionally set a residual value to reduce monthly repayments.
07See repayments, total cost, and tax benefits.

Key info

Chattel mortgage: you own the asset from day one, claim GST on purchase upfront, interest is tax-deductible, and you can depreciate the asset.
Hire purchase: similar to chattel mortgage but you don't own until the final payment. You can still claim GST and depreciate.
Finance lease: lender owns the asset. Payments are 100% tax-deductible (including principal). No GST claim upfront.
The $20,000 Instant Asset Write-Off is now a permanent feature (from 1 July 2026) for small businesses with turnover under $10 million — no longer an annual budget measure that needs re-announcing each year.

Pro tips

For GST-registered businesses, chattel mortgage is usually the most tax-effective — you claim the full GST upfront and depreciate the asset.
A 20-30% residual/balloon reduces monthly repayments but you'll need to refinance or pay out at the end.
Match the finance term to the asset's useful life — don't finance a 10-year asset over 3 years (cash flow pain) or a 3-year asset over 7 years (paying for something that's obsolete).
If your business has turnover under $10 million and the asset costs $20,000 or less, you can deduct the entire cost in year one under the now-permanent Instant Asset Write-Off instead of depreciating over several years.

Avoid these

Not claiming the GST upfront on a chattel mortgage — you're entitled to the full GST credit on the purchase price in your next BAS.
Choosing a finance type without understanding the tax differences — a finance lease is 100% deductible including principal, while chattel mortgage only deducts interest + depreciation.
Setting a residual too high — you end up owing a large balloon payment that's hard to pay if the equipment has depreciated below that value.
Not shopping around — equipment finance rates vary significantly between banks, brokers, and dealer finance.

Disclaimer: Estimates only. Interest rates, fees and policies change frequently. Always verify with lenders directly. General information, not personal financial advice.

Last updated · August 2026