In a nutshell
Equipment finance funds the purchase or use of business assets — vehicles, machinery, tools, technology and fit-out equipment — with the asset itself usually acting as security. The main forms in Australia are the chattel mortgage, where the business owns the asset from day one; hire purchase, where ownership passes after the final payment; and leases, where you use the asset and return, upgrade or buy it at the end.
Key points
- The asset being bought usually secures the finance, registered on the PPSR.
- Chattel mortgage, hire purchase and leasing differ in ownership, GST and tax treatment.
- A balloon or residual lowers repayments but leaves a lump sum at the end.
- The $20,000 instant asset write-off is now permanent for eligible small businesses.
- Security
- The asset itself
- Main forms
- Chattel mortgage, HP, lease
- Register
- PPSR
- Write-off threshold
- $20,000 per asset
Equipment finance is the most widely used form of business borrowing in Australia, and for good reason: the thing you’re buying pays its own way and secures its own loan. This entry explains the three main structures, how they differ on ownership and tax, and what to think about before choosing one.
Why is equipment finance usually easier to get?
Because the lender can see and value exactly what backs the loan. A new excavator or delivery van has a known price and a resale market. The lender registers its security interest on the Personal Property Securities Register (PPSR), which since 2012 has been the national register for security over personal property such as vehicles and equipment. If the loan isn’t repaid, the lender can recover the asset.
That built-in security means equipment finance often needs less paperwork than a general-purpose loan, particularly for established businesses buying common assets.
What are the main types of equipment finance?
| Chattel mortgage | Hire purchase | Finance lease | Operating lease | |
|---|---|---|---|---|
| Who owns it during the term | Your business | The financier | The financier | The financier |
| At the end | Yours, security released | Ownership passes to you | Pay residual, refinance or return | Return or upgrade |
| GST on the purchase | Generally claimed up front | Generally claimed up front | Claimed on each payment | Claimed on each payment |
| Depreciation and interest | Generally claimed by you | Generally claimed by you | Lease payments generally deductible | Rental generally deductible |
| Balloon / residual | Optional balloon | Optional balloon | Residual set at start | None |
Tax treatment depends on your circumstances; confirm with your accountant. Our chattel mortgage vs lease comparison goes through each in detail.
How does the instant asset write-off fit in?
For businesses with aggregated turnover under $10 million, the ATO’s instant asset write-off lets you immediately deduct the business portion of eligible assets that cost less than $20,000 each, in the year they’re first used or installed ready for use. In September 2026 the ATO confirmed this $20,000 threshold is permanent. It applies per asset, so several qualifying purchases can each be written off.
How you finance the asset doesn’t stop you claiming it, but the structure affects who claims it: with a chattel mortgage or hire purchase the business generally does, while under a lease the financier owns the asset. If you’re GST-registered, the asset’s cost for this purpose excludes the GST you can claim back.
What about balloon payments?
A balloon (on a chattel mortgage or hire purchase) or residual (on a lease) is a lump sum left owing at the end of the term. It lowers regular repayments, which helps cash flow, but you need a plan for it: pay it out, refinance it, or sell or trade the asset. Setting a balloon close to the asset’s likely resale value is a common way to manage the risk. See repayment structures.
If you’d like to know which structure suits the asset you’re buying, you can check with a specialist — it takes about a minute.
What do lenders look at for equipment finance?
- The asset. New or used, age at the end of the term, resale market, and whether it’s a standard or specialised item.
- The supplier. Dealer invoices are straightforward; private sales need extra checks, including a PPSR search to confirm there’s no existing security.
- Your business. ABN age, trading history and, for larger amounts, financial statements or bank statements.
- Credit history. Past issues are considered case by case, and the asset’s security can offset some concerns.
When is equipment finance not the best tool?
- The “equipment” is mostly installation, fit-out labour or software with little resale value — a general-purpose loan may suit better.
- You need the asset for a short project only — hiring may beat financing.
- Your balance sheet already carries heavy asset finance and cash flow is tight — adding another repayment may not help.
New or used equipment — does it change the finance?
Both can be financed, but lenders treat them differently:
| New asset | Used asset | |
|---|---|---|
| Valuation | Supplier invoice | Invoice plus inspection or valuation for larger items |
| Maximum term | Often longer | Limited by the asset’s age at the end of the term |
| Deposit | Often none for established businesses | More likely for older or specialised items |
| Checks | Dealer paperwork | PPSR search, proof of ownership, condition |
For private sales, a PPSR search is essential. If the seller still owes money on the asset and a financier has registered its interest, that security can follow the asset to you unless it’s released at settlement.
Where does equipment finance sit among other options?
Equipment finance often works best alongside other facilities rather than instead of them. A business might fund machinery with a chattel mortgage, keep a line of credit for day-to-day cash flow, and use invoice finance if customers pay slowly. Keeping asset purchases in equipment finance also preserves your unsecured borrowing capacity for needs that have no asset to secure them.
Worked example (illustrative)
Illustrative only. An earthmoving contractor wins a council contract and needs a second-hand excavator costing $140,000 and a new tipper trailer costing $18,000. The business is GST-registered with turnover under $10 million.
A chattel mortgage over the excavator, with a modest balloon matched to its expected resale value, keeps repayments in line with contract income. The trailer, costing less than $20,000, can be funded separately or paid in cash, and may qualify for the instant asset write-off. The contractor’s accountant confirms the GST and depreciation treatment before settlement.
Buying equipment or vehicles for the business?
Getting the structure right — chattel mortgage, hire purchase or lease — can matter as much as the approval. Tell us what you’re buying in about 60 seconds; there’s no credit check when you first enquire. We don’t fire your details off to a pile of lenders; a real person reviews your situation and calls you. Please include the asset, its price and whether it’s new or used so we can match the right option first time.
Frequently asked questions
What can be funded with equipment finance?
Almost any identifiable business asset: cars, utes, trucks, trailers, excavators, forklifts, medical and dental equipment, kitchen equipment, IT hardware, solar and more. New and used assets can both be financed, though some lenders limit asset age.
Can I claim GST on a chattel mortgage?
The ATO explains that for hire purchase agreements entered into after 1 July 2012 you can generally claim the GST credit up front rather than instalment by instalment. Chattel mortgages are treated similarly because the business owns the asset. Leases are different: GST is claimed on each lease payment. Confirm your position with your accountant.
Is the instant asset write-off still available?
Yes. The ATO confirmed in September 2026 that the $20,000 instant asset write-off is permanent for businesses with aggregated turnover under $10 million, applying per asset. Assets costing $20,000 or more generally go into the small business depreciation pool.
Do I need a deposit for equipment finance?
Not always. Many lenders will fund the full purchase price for established businesses and common assets. A deposit may be required for older assets, specialised equipment or newer businesses.
What happens at the end of an equipment loan?
With a chattel mortgage, the security is released once paid. With hire purchase, ownership transfers after the final payment. With a lease, you pay the residual, refinance it, return the asset or upgrade.