Equipment finance isn't just about acquiring the assets your business needs — it can also be structured to deliver meaningful tax advantages. Understanding how different finance structures interact with your tax position is key to making the right decision.
Instant Asset Write-Off
The ATO's instant asset write-off allows eligible businesses to immediately deduct the cost of qualifying assets purchased and first used or installed in the income year. As of the 2024–25 income year, the threshold is $20,000 per asset for businesses with aggregated turnover under $10 million — but this threshold and the eligibility rules have changed frequently in recent years.
Always confirm the current rules and whether your specific asset qualifies with your accountant before making purchasing decisions based on this concession.
Depreciation on Financed Equipment
Under a chattel mortgage (where you own the asset from day one), you can claim depreciation on the asset over its effective life as determined by the ATO. This reduces your taxable income year-on-year over the loan term. The depreciation rate depends on the asset type and the method used (prime cost or diminishing value).
GST Input Tax Credits
If you use a chattel mortgage to purchase equipment for business purposes and are registered for GST, you can claim the full GST component of the purchase price as an input tax credit in the period the purchase is made — rather than claiming GST on repayments over time as you would with a finance lease.
This upfront GST credit (equal to 1/11th of the purchase price) can provide a significant cash flow benefit in the purchase period.
Interest Deductions
Interest paid on a chattel mortgage for business equipment is generally tax deductible. Under a finance lease, the full lease repayment (principal and implied interest) is deductible as a business expense. Under a commercial hire purchase, interest is deductible and depreciation can be claimed.
Get the Right Advice
Tax laws change regularly and your specific circumstances will determine which structure delivers the best outcome. Always consult your accountant before finalising a finance structure. Our team at Overdrive Funding can explain the mechanics of each option and arrange the structure you need.