For many Australian small to medium-sized businesses, equipment finance isn’t just about conserving cash flow—it can also unlock valuable tax benefits. By understanding how tax incentives like the instant asset write-off and depreciation deductions work, business owners can make smarter financing decisions and reduce their taxable income.
In this article, we’ll explain how to maximise your tax savings when financing business assets and what to consider when timing your purchases.
What is Equipment Finance?
Equipment finance enables businesses to acquire commercial machinery, vehicles, or technology without paying the full cost upfront. Instead, the purchase is funded through structures like chattel mortgages, hire purchase, or equipment leases, allowing for predictable repayments and preserved working capital.
But beyond improving cash flow, equipment finance can also support your tax strategy—if structured correctly.
Tax Benefits of Financing Equipment
When you finance assets for business use, you may be eligible to claim tax deductions that lower your overall liability.
Key tax benefits include:
✅ Instant Asset Write-Off
Eligible businesses can write off the full cost of qualifying assets up to a threshold amount, provided the asset is first used (or installed ready for use) in the same financial year.
✅ Temporary Full Expensing (now expired)
Previously available during the pandemic period, this scheme allowed 100% write-off of eligible assets. While now closed, its legacy still influences financing strategies.
✅ Depreciation Deductions
If the instant write-off isn’t available, you may still depreciate the asset over time, claiming a portion of the cost each year.
✅ GST Credits
If your business is registered for GST, you may be able to claim GST on the purchase price up front—especially when using a chattel mortgage.
Choosing the Right Finance Structure for Tax Benefits
Not all asset finance structures deliver the same tax treatment. Here’s how the three main options compare:
1. Chattel Mortgage
- You own the asset from day one.
- Eligible for instant asset write-off and GST credit.
- Depreciation and interest are typically deductible.
Best for: Businesses seeking full ownership and immediate tax deductions.
2. Hire Purchase
- Ownership transfers at the end of the agreement.
- Tax treatment is generally similar to a chattel mortgage.
- GST is claimable on the purchase price (subject to ATO guidelines).
Best for: Businesses that prefer ownership but want to spread costs.
3. Equipment Lease
- Lender retains ownership throughout.
- Lease payments are typically fully deductible as operating expenses.
- No depreciation or GST credit on purchase (as you don’t own the asset).
Best for: Businesses that don’t need ownership and want straightforward deductions.
Example: How Instant Asset Write-Off Works
Let’s say your business finances a $40,000 work ute using a chattel mortgage before the end of the financial year. If eligible for the instant asset write-off, you could:
- Write off the full $40,000 cost against your taxable income this financial year
- Claim back the GST component (if registered)
- Reduce your tax bill and improve year-end cash flow
Important: To claim the write-off, the asset must be in use or ready for use before 30 June. Timing matters.
Tips to Maximise Your Tax Savings
Here’s how to get the most out of your equipment finance tax deductions:
📌 Talk to Your Accountant Early
Your accountant can help you align asset purchases with tax planning and assess your eligibility for available incentives.
📌 Finance Before EOFY
To benefit from write-offs this year, ensure the asset is delivered and operational before 30 June.
📌 Keep Good Records
Maintain documentation like purchase invoices, finance contracts, and use logs for ATO compliance.
📌 Use the Right Finance Product
Choose a finance structure—like a chattel mortgage—that allows full tax benefits when ownership is essential.
The Role of an Equipment Finance Broker
Navigating tax rules and finance structures can be complex. That’s where a trusted equipment finance broker like Capital Plus Finance can help.
We work with over 40 lenders and understand how to structure asset finance to help businesses access:
- The instant asset write-off (where available)
- Depreciation and interest deductions
- Flexible repayment options aligned with cash flow
Our team can also liaise with your accountant or adviser to ensure your finance supports your tax goals.
Make Equipment Finance Work for Your Tax Strategy
With the right timing and finance structure, your next equipment purchase could offer more than just operational efficiency—it could also deliver significant tax advantages.
At Capital Plus Finance, we make it easy to finance equipment and commercial vehicles in a way that supports your broader business goals, from cash flow management to tax optimisation.
👉 Contact us today to learn how you can finance smart and save more this financial year.
