Equipment Finance Guide (Australia)
Your complete guide to financing business equipment, machinery, and tools in Australia.
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Key Takeaways
- ✓Equipment finance helps businesses acquire machinery without large upfront payments
- ✓Three main types: Chattel Mortgage, Operating Lease, and Hire Purchase each with different benefits
- ✓Chattel mortgages offer immediate ownership and full GST claims for ABN holders
- ✓Operating leases provide tax deductions and equipment upgrades with no ownership
- ✓Eligibility requires an ABN, trading history, and business use over 50%
- ✓Applications typically take 24-48 hours with minimal documentation
- ✓Finance amounts range from $10,000 to $500,000+ with terms up to 7 years
What is Equipment Finance?
What is equipment finance?
Equipment finance is a type of business loan that helps you acquire machinery, tools, vehicles, or other business equipment without paying the full purchase price upfront. Instead, you make regular payments over an agreed term while using the equipment to generate income for your business.
Equipment finance is essential for Australian businesses looking to grow without tying up large amounts of working capital. Whether you need construction machinery, commercial vehicles, manufacturing equipment, or technology, equipment finance allows you to spread the cost over time while the equipment helps generate revenue.
The Australian equipment finance market offers flexible solutions tailored to different business needs. From small tools worth a few thousand dollars to major industrial equipment costing hundreds of thousands, there are finance options available with competitive rates and terms.
Key benefits include: Preserved cash flow, potential tax advantages, fixed repayment schedules, and the ability to acquire equipment immediately rather than saving up the full purchase price.
Types of Equipment Finance
What is a Chattel Mortgage?
A secured loan where you own the equipment from day one. You can claim GST credits upfront and depreciate the asset. Best for profitable businesses wanting ownership and tax benefits.
What is an Operating Lease?
A rental arrangement where you never own the equipment. Lease payments are fully tax deductible, and you can easily upgrade equipment at lease end. Ideal for technology and vehicles.
What is Hire Purchase?
You hire the equipment with an option to purchase at the end. Similar to a loan but ownership transfers only after final payment. Good for businesses wanting eventual ownership.
Choosing the Right Type
The best type of equipment finance depends on your business goals, tax situation, and cash flow needs. Chattel mortgages are popular with profitable businesses that want to own assets and maximise tax benefits. Operating leases suit businesses that want the latest equipment without ownership responsibilities.
Hire purchase sits between the two, offering eventual ownership while keeping initial costs lower than a traditional loan. Your accountant can help determine which structure provides the best outcome for your specific circumstances.
Finance Type Comparison
| Feature | Chattel Mortgage | Operating Lease | Hire Purchase |
|---|---|---|---|
| Ownership timing | Immediate | Never (rental) | At end of term |
| GST timing | Claim upfront | Monthly on payments | At final payment |
| What's deductible | Interest + depreciation | Full rental payments | Interest portion |
| Depreciation | You claim | Not applicable | After ownership |
| Balloon/Residual | Available | Not applicable | Available |
| Upgrade flexibility | Sell or trade | Easy upgrades | Limited |
| Balance sheet | Asset + liability | Off balance sheet | Liability only |
Note: Tax implications vary by individual circumstances. Always consult your accountant for advice specific to your situation.
Eligibility Requirements
Who's eligible for equipment finance?
Australian businesses with an ABN, trading history (typically 3+ months), good credit standing, and demonstrated ability to service repayments. Equipment must be used for business purposes over 50% of the time.
Eligibility Checklist
Active ABN
Must have a valid Australian Business Number and be actively trading
Trading History
Minimum 3 months trading (some lenders require 6-12 months)
Credit Standing
Good credit history for the business and directors/guarantors
Ability to Repay
Demonstrated cash flow to service the equipment finance repayments
Business Use
Equipment must be used for business purposes over 50% of the time
Asset Age
Equipment age limits vary by lender (typically up to 10-15 years at loan end)
Documentation Requirements
Most equipment finance applications require minimal paperwork compared to traditional business loans. Typically you'll need recent bank statements, ABN details, and equipment quotes. Larger finance amounts may require financial statements or tax returns.
Common documents include: 3-6 months bank statements, equipment supplier quote, ABN registration details, director identification, and sometimes previous year's tax returns.
Tax & GST Benefits
How do tax benefits work?
Tax benefits vary by finance type. Chattel mortgages allow depreciation and interest deductions plus upfront GST claims. Leases provide full payment deductibility. Always seek professional tax advice for your situation.
Chattel Mortgage Tax Benefits
With a chattel mortgage, you own the equipment from day one, allowing you to claim depreciation deductions against your taxable income. The interest portion of your repayments is also tax deductible. If you're registered for GST, you can claim the full GST credit upfront on the equipment purchase.
Operating Lease Tax Benefits
Operating lease payments are generally fully tax deductible as a business expense. This can provide immediate tax relief and simplified accounting. You claim GST credits monthly on your lease payments rather than upfront.
Important Tax Considerations
The Australian Taxation Office has specific rules about equipment finance and tax deductions. The equipment must be used for income-producing activities, and the finance structure must be genuine. Always consult a qualified tax advisor to ensure compliance and optimise your tax position.
Tax Disclaimer: This information is general in nature and should not be considered as tax advice. Tax implications vary based on individual circumstances. Always consult a qualified tax professional for advice specific to your situation.
Application Process
How long does approval take?
Most equipment finance applications are approved within 24-48 hours. Simple applications with good credit history can be approved same day. Complex or large applications may take 3-5 business days.
Enquiry & Quote
Submit your equipment details and receive an indicative quote within hours
Application & Docs
Complete the application with minimal paperwork - often just bank statements and ABN
Approval & Offer
Receive formal approval and terms, typically within 24-48 hours
Settlement & Delivery
Funds released to supplier, equipment delivered, and finance commences
Tips for Faster Approval
- Have all documentation ready before applying
- Ensure bank statements show consistent positive cash flow
- Get detailed equipment quotes from suppliers
- Be realistic about finance amounts relative to your business size
- Consider a deposit to improve terms and approval chances
Pro Tip: Working with an experienced equipment finance broker can streamline the process and help you access multiple lenders to find the best terms for your situation.
Frequently Asked Questions
Case Studies
See how different Australian businesses have used equipment finance to grow and succeed.
Tradie's Excavator Finance
ConstructionChallenge
Small earthmoving contractor needed a $120,000 excavator but didn't want to tie up all their cash flow in one purchase.
Solution
Structured a chattel mortgage with a 20% balloon payment over 5 years, reducing monthly payments while maintaining ownership and depreciation benefits.
Equipment Financed
8-tonne excavator with attachments
Finance Type
Chattel MortgageOutcome
Monthly payments of $1,850 instead of $2,400, preserving cash flow for other business expenses while building equity in the asset.
Tech Company Upgrade Program
TechnologyChallenge
Growing IT services company needed to regularly upgrade computer equipment to stay competitive but didn't want ownership of depreciating tech assets.
Solution
Set up operating leases for all computer equipment with 3-year terms and easy upgrade options at lease end.
Equipment Financed
Laptops, servers, and networking equipment worth $75,000
Finance Type
Operating LeaseOutcome
Full tax deductibility of lease payments, predictable monthly costs, and access to latest technology without disposal hassles.
Café Equipment Startup
HospitalityChallenge
New café owner needed commercial kitchen equipment worth $45,000 but had limited cash after securing premises and initial fit-out.
Solution
Hire purchase agreement over 4 years with equipment as security, allowing gradual ownership while preserving working capital.
Equipment Financed
Commercial coffee machine, refrigeration, and kitchen equipment
Finance Type
Hire PurchaseOutcome
Opened on schedule with monthly payments of $1,200, building towards full ownership while maintaining cash flow for operations.
Important: All finance is subject to lender approval and assessment criteria. Rates, terms and conditions mentioned are indicative only and may vary based on individual circumstances. This guide is for informational purposes and should not be considered as financial advice. Always seek professional advice for your specific situation.
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