When a business needs to buy equipment — a vehicle, machinery, commercial kitchen, or IT fit-out — there are two main finance routes: equipment-specific finance products (chattel mortgage, finance lease, operating lease) or a standard business loan. They're not the same, and the difference matters for your tax, cash flow, and balance sheet.
Equipment Finance Products Explained
| Product | Ownership | Tax Treatment | Best For |
|---|---|---|---|
| Chattel mortgage | You own it from day 1 | Depreciation + interest deductible; GST claimed upfront | Equipment you'll use long-term |
| Finance lease | Lender owns it; you buy at end | Lease payments deductible | Equipment with residual value |
| Operating lease | Lender owns it; you return it | Lease payments deductible; off balance sheet | Equipment you want to upgrade regularly |
| Hire purchase | Lender owns until last payment | Depreciation + interest deductible | Similar to chattel mortgage |
Business Loan for Equipment Purchase
Using a general business term loan to buy equipment means you own the asset outright and can use any surplus funds for other business needs. The trade-off is that equipment-specific products are usually structured more favourably for asset purchases.
| Factor | Equipment Finance | Business Loan |
|---|---|---|
| Interest rate | Lower (asset is security) | Slightly higher |
| GST treatment | Claim full GST upfront (chattel) | Claim GST as normal purchase |
| Approval speed | Fast (asset-backed) | Standard business assessment |
| Flexibility | Tied to the specific asset | Can use funds for anything |
| Balloon/residual | Common — reduces repayments | Usually straight repayment |
The Instant Asset Write-Off (2026)
Under Australia's instant asset write-off rules, eligible businesses can claim the full cost of new or used equipment in the year of purchase — rather than depreciating over time. This applies to chattel mortgages and hire purchase agreements where you own the asset from day one. Check with your accountant for current thresholds and eligibility, as the rules change with each budget.
Rule of thumb: If you're buying a specific asset and want the best rate and tax outcome, use equipment finance (usually a chattel mortgage). If you need flexible funds for multiple purposes including an equipment purchase, a business loan makes more sense.
When a Business Loan Makes More Sense
- You're buying multiple items and want one facility
- The "equipment" is intangible (software, fit-out labour)
- You want to preserve cash flow for operations
- You need flexibility to overpay or redraw
When Equipment Finance Makes More Sense
- Buying a single identifiable asset (vehicle, machine, medical equipment)
- You want to maximise the instant asset write-off
- You want lower repayments via a balloon/residual structure
- The business is relatively new — equipment as security can help approval
Frequently Asked Questions
A chattel mortgage is a loan secured against a moveable asset ("chattel") — typically a vehicle or equipment. You own the asset from purchase day but the lender holds a mortgage over it until the loan is repaid. It's the most common equipment finance product in Australia.
Yes — equipment finance is often available to businesses as young as 6 months because the asset itself acts as security. You'll typically need to provide personal credit history and a deposit (10–20% of asset value).
At the end of a finance lease, you typically have three options: pay the residual amount and own the asset outright, trade in the asset and roll into a new lease, or hand the asset back if it has met agreed conditions.
Yes. For chattel mortgages and hire purchase, both the interest component of repayments and the asset's depreciation are deductible. For leases, the full lease payment is generally deductible. Always confirm with your accountant as treatment varies.
Yes. Most lenders offer chattel mortgages on used vehicles and equipment, though there may be age restrictions (e.g., vehicle must be under 10–15 years old). Used equipment typically attracts a slightly higher rate than new.