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?

The Instant Asset Write-Off allows eligible businesses to immediately deduct the full cost of eligible depreciating assets. Check the current year's threshold on the ATO website, as it changes regularly. This applies to the TOTAL cost of the asset, regardless of the finance method used. Consult your accountant for the latest rules.

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).

Equipment Finance Calculator

Calculator

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

Free to useNo data storedAI insightsUpdated: February 2026

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.

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Real-World Examples

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: $1,015. Residual (balloon): $13,000 due at end. Total paid: $73,900 + $13,000 = $86,900. GST claimed upfront: $6,500. Annual depreciation deduction: ~$10,400. After-tax cost (25% rate): significantly reduced.

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: $1,893. Total paid: $159,012. Total interest: $39,012. As a finance lease, the full $1,893/month is 100% tax-deductible. At 25% company tax, the after-tax cost is ~$1,420/month. No GST claimed upfront, but GST is embedded in the payments.

Frequently Asked Questions

Glossary

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 government incentive allowing businesses to immediately deduct the full cost of eligible new assets in the year of purchase, rather than depreciating over several years.

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

1Enter the equipment cost (GST-exclusive).
2Add any deposit or trade-in value.
3Input the interest rate offered.
4Choose the finance term.
5Select the finance type to compare tax treatment.
6Optionally set a residual value to reduce monthly repayments.
7See repayments, total cost, and tax benefits.

Key Information

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 Instant Asset Write-Off allows businesses to immediately deduct the full cost of eligible assets (check current thresholds).

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).
Check if the Instant Asset Write-Off applies — you may be able to deduct the entire cost in year one instead of depreciating over several years.

Avoid These Mistakes

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: This calculator provides estimates only and should not be relied upon for financial decisions. Interest rates, fees, and policies change frequently. Always verify information with lenders directly. This is general information, not personal financial advice. Consider seeking advice from a licensed mortgage broker or financial advisor.

Last updated: February 2026