Two of the most common equipment finance structures in Australia, chattel mortgage and finance lease, look similar on the surface. Same monthly repayments, same equipment, same lender. But the tax treatment is fundamentally different, and in 2026, that difference is worth thousands.
Everything flows from this single point:
At the end of a finance lease, you typically have the option to purchase the asset for the residual value, refinance, or return it.
This is the most important tax consideration right now.
The $20,000 instant asset write-off, confirmed until 30 June 2026, allows eligible small businesses to immediately deduct the full purchase cost of assets under $20,000 in the year of purchase, rather than depreciating over time.
Chattel mortgage qualifies. Finance lease does not.
Because you own the asset from day one under a chattel mortgage, you're entitled to claim the write-off. Under a finance lease, the lender owns the asset, so you cannot claim depreciation, and you cannot access the instant asset write-off.
For a $19,500 asset purchased under a chattel mortgage before 30 June 2026, a business on the 25% small business tax rate saves approximately $4,875 in tax this financial year. Under a finance lease, that saving is not available.
| Structure | GST on Purchase |
|---|---|
| Chattel Mortgage | Claim full GST on the purchase price upfront in the BAS period of purchase |
| Finance Lease | Claim GST progressively on each lease payment over the term |
For a GST-registered business, claiming the full GST upfront under a chattel mortgage improves cash flow immediately: that's a refund or offset available in your next BAS lodgement.
| Tax Item | Chattel Mortgage | Finance Lease |
|---|---|---|
| Instant asset write-off (under $20k) | Yes | No |
| Depreciation (assets over $20k) | Yes: you own the asset | No: lender owns the asset |
| Interest charges | Deductible | Not applicable |
| Lease payments | Not applicable | Fully deductible |
| GST claim | Upfront in full | Progressive per payment |
Finance leases typically offer lower monthly repayments because there's no balloon payment: the residual value is built into the lease structure. Chattel mortgages allow an optional balloon payment at the end of the term, which can reduce monthly repayments to a comparable level while keeping the ownership and tax benefits.
The right structure depends on your specific tax position, business structure, and cash flow. Always confirm with your accountant before settling on a finance product, especially with the EOFY deadline approaching.
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