Chattel Mortgage vs Lease vs Hire Purchase: Which Fits Your Business?
Asset and Vehicle Finance
GST timing, tax, ownership, your accounts and your next loan, compared structure by structure
Own it from day one, rent it, or buy it by instalments? Here is how a chattel mortgage, a finance lease, an operating lease and commercial hire purchase differ on GST timing, tax deductions, ownership, your accounts and what you can borrow next.
Quick Answer
The difference is ownership and GST timing. A chattel mortgage or hire purchase puts the asset with your business for tax; a finance lease or rental leaves the financier as owner and usually spreads the GST and deductions across the rentals.
Also called: chattel lease (a common mix-up: a chattel mortgage is a loan), lease vs chattel mortgage, finance lease vs chattel mortgage, and goods loan (some banks market a chattel mortgage as a goods loan; it is the same structure).
What "rental" means here: this guide uses "rental" for an asset-rental arrangement where the financier keeps ownership. Some rental or service contracts are structured differently, so the contract terms still control the accounting, tax and end-of-term treatment.
What is the difference between a chattel mortgage, a lease and hire purchase?
The difference is who owns the asset and when: with a chattel mortgage your business owns it from settlement, with hire purchase it becomes yours on the final payment, and with a finance or operating lease the financier owns it throughout. The government's own definition puts it the same way, describing a chattel mortgage as "similar to a hire-purchase agreement, although the business owns the asset from the start".
Source: business.gov.au, Key financial terms, updated 9 July 2024, read 2 October 2026. A government glossary definition, not advice.This table puts the four structures side by side, feature by feature.
| Feature | Chattel mortgage | Finance lease | Operating lease or rental | Commercial hire purchase |
|---|---|---|---|---|
| Who owns the asset during the term | Your business, from settlement | The financier | The financier | The financier, until the final payment |
| When the GST credit comes back | Generally in full, on the activity statement for the purchase period | With each rental, as rentals fall due | With each rental, as rentals fall due | In full up front, including the GST on the interest, for agreements from 1 July 2012 |
| What the business deducts | Decline in value, plus interest | The rentals, for business use; a car over the car limit is taxed as a notional sale and loan instead | The rentals, for business use; a car over the car limit is usually taxed as a notional sale and loan instead | Decline in value, plus the interest component |
| Can the business use the instant asset write-off | Yes, if the asset qualifies | No, the financier holds the asset | No | Yes, if the asset qualifies |
| What the financier registers on the PPSR | A security interest over the asset | Its security interest as lessor, at any term | Its interest as lessor, only if it is a PPS lease under the Act's term test | Its security interest as owner |
| End-of-term amount | An optional balloon | A residual value | Usually none | An optional final amount |
| What happens at the end | Pay any balloon and the security is released | Use the contract's end option: purchase for the agreed amount if permitted, refinance, return or upgrade | Return, upgrade or extend under the contract | Title passes on the final payment |
| How it shows in accounts that apply AASB 16 | The asset and the loan | A right-of-use asset and a lease liability | A right-of-use asset and a lease liability, unless short-term or low value | An asset and a matching liability; your accountant confirms whether as owned plant or a right-of-use asset |
Sources: Australian Taxation Office, GST: Hire purchase and leasing, last updated 6 April 2017, read 2 October 2026; Personal Property Securities Register, Key legislative changes, read 2 October 2026; Australian Accounting Standards Board, AASB 16 Leases, compilation November 2022, read 2 October 2026; Australian Taxation Office, Guide to depreciating assets 2026, updated 30 May 2026, read 2 October 2026.
Each structure has its own page if you want the detail. There is how a chattel mortgage works in full, what a finance lease and an operating lease are, and commercial hire purchase explained.
Pricing differs by structure and by lender, so this guide compares how each structure works, not what it costs.
When can you claim the GST under each structure?
Under a chattel mortgage or a commercial hire purchase, a GST-registered business generally claims the full GST credit up front; under a finance lease or rental it claims one-eleventh of each rental as the rentals fall due.
| Structure | If you account on an accruals basis | If you account on a cash basis | Is the car-limit cap applied? |
|---|---|---|---|
| Chattel mortgage (a purchase) | In full, in the first period in which the invoice is issued or you make any payment, once you hold a tax invoice | In full, in the period you make the payment, usually settlement, when the loan pays the seller | Yes, if it is a car over the car limit |
| Finance lease | One-eleventh of each rental, in the period it is due or invoiced | One-eleventh of each rental, in the period you pay it | No for the GST in the rentals; for income tax, a lease of a car over the limit is treated as a notional sale and loan |
| Operating lease or rental | One-eleventh of each rental, in the period it is due or invoiced | One-eleventh of each rental, in the period you pay it | No for the GST in the rentals; for income tax, a lease of a car over the limit is treated as a notional sale and loan |
| Commercial hire purchase | In full, in the period of the first payment or the tax invoice | In full, up front, including the GST on the credit charges | Yes, if it is a car over the car limit |
Sources: Australian Taxation Office, GST: Hire purchase and leasing, last updated 6 April 2017, read 2 October 2026; Australian Taxation Office, When you can claim a GST credit, last updated 14 September 2026, read 2 October 2026; Australian Taxation Office, Purchasing a motor vehicle, last updated 3 June 2026, read 2 October 2026. The chattel mortgage must be a creditable acquisition; general information, not tax advice.
The tax office treats each lease payment "as though you are making a separate purchase each tax period", so the credit is one-eleventh of each instalment (ATO, read October 2026). Your accounting basis (cash or accruals) decides which period each credit falls in. This assumes you are registered for GST and use the asset for the business; it is general information, not tax advice.
Buying a car over the car limit caps the GST credit on the purchase, but the GST in lease rentals is not capped; the current limit and cap sit with the tax rules for a car over the car limit.
Does the GST credit on hire purchase include the interest?
Yes, for agreements entered from 1 July 2012: the tax office says every component of those agreements is taxable, whether or not the credit charge is shown separately, so a registered business claims the GST on the whole amount, interest and fees included, in the period of the first payment or tax invoice. Our guide explains how commercial hire purchase works, including older agreements. Some finance pages still say hire purchase GST is spread across the payments (broker-desk observation, September 2026), but the tax office says otherwise for current agreements.
Source: ATO, GST: Hire purchase and leasing, last updated 6 April 2017, read 2 October 2026. General information, not tax advice.Can you claim the GST if you are not registered?
No. If your business is not registered for GST, there are no GST credits under any structure, and the GST simply becomes part of what the asset costs you. Whether and when to register is a question for your accountant. Our glossary covers how GST credits work.
Is a lease or a chattel mortgage better for tax?
Neither is better for tax in every case: a chattel mortgage or hire purchase lets your business claim the asset's decline in value plus the interest, while a lease or rental lets it deduct the rentals instead, so the better fit turns on your income, the asset and the timing of the purchase. The holder of the asset claims its decline in value, and under a finance lease or rental the financier is the holder.
| Structure | What your business deducts | Instant asset write-off | A car costing more than the car limit |
|---|---|---|---|
| Chattel mortgage | The decline in value of the asset, plus the interest | Yes, if the asset qualifies | Decline in value on a cost capped at the car limit, plus the interest |
| Finance lease | The rentals, to the extent the asset is used for the business | No, the financier holds the asset | Treated as a notional sale and loan: capped decline in value plus the finance charge, not the rentals |
| Operating lease or rental | The rentals, to the extent of business use | No, the financier holds the asset | The same notional sale and loan treatment, unless it is a short-term hire |
| Commercial hire purchase | Decline in value plus the interest component, as a purchase with a loan | Yes, if the asset qualifies | Decline in value on a cost capped at the car limit, plus the interest component |
The hire purchase treatment comes from Division 240. The tax office treats a hire purchase as "a notional sale" of the goods by the financier, financed by "a notional loan", and the hirer is the holder if it is "reasonably likely" that it will actually acquire the asset. That is the general rule, and it is not tax advice.
Source: ATO, Guide to depreciating assets 2026, updated 30 May 2026, read 2 October 2026.Who can use the $20,000 instant asset write-off?
A small business with aggregated turnover under $10 million can immediately deduct an eligible asset costing less than $20,000, applied per asset, if the business holds the asset and uses the simplified depreciation rules (ATO, updated 27 August 2026, read October 2026). The tax office says the permanent $20,000 write-off from 1 July 2026 "is now law", and the asset must be first used or installed ready for use in the income year you claim it. So it is available under a chattel mortgage or hire purchase, but not under an ordinary lease or rental, where the financier holds the asset. This is general information, not tax advice; our glossary explains the instant asset write-off.
Source: ATO, $20,000 instant asset write-off, last updated 27 August 2026, read 2 October 2026.What changes for a car over the car limit?
Buying a car that costs more than the car limit, which is $69,883 for the 2026-27 income year, caps the GST credit at $6,353 and caps the cost you depreciate at the limit (ATO car thresholds, published 9 June 2026, read October 2026). If you lease a car that costs more than the car limit, the ATO treats it as a notional sale and loan, so you claim decline in value on a cost capped at the car limit plus the finance charge, not the rentals; the GST credits on the rentals are not capped by the car limit. The figures apply to that income year only, because the limit is indexed each 1 July, and partial business use means a partial credit.
Sources: ATO, Car thresholds from 1 July, published 9 June 2026; Purchasing a motor vehicle, last updated 3 June 2026; Guide to depreciating assets 2026, updated 30 May 2026. All read 2 October 2026. General information, not tax advice.Whether a ute or van is a "car" turns on how the manufacturer designed it. For GST, the ATO defines a car as a motor vehicle designed to carry a load of less than 1 tonne and fewer than 9 passengers, so check the payload rating and seating on the build plate before assuming the cap applies. For cars, utes and vans, see how the car limit works on a business vehicle.
Source: ATO, About GST and motor vehicles, read 2 October 2026.Who owns the asset under each structure?
Your business owns the asset from settlement under a chattel mortgage, while under hire purchase the financier owns it until the final payment, and under a finance or operating lease the financier owns it throughout unless you buy it under the contract. Ownership decides what you can sell, modify or keep before the contract ends.
| Question | Chattel mortgage | Finance lease | Operating lease or rental | Commercial hire purchase |
|---|---|---|---|---|
| Who holds title | Your business, from settlement | The financier | The financier | The financier, until the final payment |
| What goes on the PPSR | The lender's security interest | The financier's interest, at any term | The financier's interest, only if it is a PPS lease | The financier's interest |
| At the end of the term | Pay any balloon; the security is released | Use the contract's end option: purchase for the agreed amount if permitted, refinance, return or upgrade | Return, upgrade or extend under the contract | Title passes on the final payment |
| Leaving early | Ask for a payout figure and pay it | Usually the remaining rentals and the residual, under the contract | Usually the remaining rentals, under the contract | Ask for a payout figure and pay it |
The Personal Property Securities Act treats a finance lease or hire purchase agreement that in substance secures payment as a security interest, whatever its term (s 12(2)). Any other lease is caught only if it is a PPS lease. Under section 13 of the Personal Property Securities Act, a lease from a business that regularly leases goods is a PPS lease if its term is more than 2 years, or once you have held the goods for more than 2 years under an indefinite term lease (compilation 14 October 2024, read October 2026). That test has applied since 20 May 2017, and leases entered before that date follow the earlier rules. This is the financier's registration, not yours, and it registers because, in the register's own words, "failing to register a security interest on the PPSR can result in you losing your goods".
Sources: Personal Property Securities Act 2009, sections 12(2) and 13, compilation 14 October 2024; Personal Property Securities Register, Key legislative changes and PPS case law and Leases, bailments and consignments. All read 2 October 2026.What happens at the end of the term?
At the end of the term a chattel mortgage is finished once any balloon is paid and the lender releases its security, hire purchase passes title to your business on the final payment, and a lease ends with whatever option the contract gives you: buy at the agreed residual if permitted, refinance, return or upgrade. A balloon on a loan, or a residual on a lease, is the amount left owing when the term finishes; our guide covers balloon payments and residual values, and our glossary defines a residual value.
Paying the residual to take ownership is a separate purchase from the lease. The tax office says GST may apply to that residual payment, and a registered business may be able to claim a GST credit on it. The residual on a car lease must meet the ATO's minimum residual value for the lease term, so check the figure in the contract before you sign. Your accountant confirms the tax treatment of the buyout.
Sources: ATO, GST: Hire purchase and leasing, last updated 6 April 2017, and Car leasing and FBT, 12 January 2023, both read 2 October 2026. General information, not tax advice.What happens if you sell, trade or exit early?
You can sell, trade or exit early, but the path depends on who owns the asset. With a chattel mortgage, ask the lender for a payout figure and arrange for its PPSR security to be released as part of the sale or refinance. With hire purchase, the financier still holds title, so the agreement must be paid out before title can pass. With a lease or rental, your business generally cannot simply sell an asset it does not own; early return, upgrade or purchase depends on the contract.
Leaving a hire purchase early works like leaving a loan early: you ask for a payout figure and pay it. Our insight sets out how a payout figure is worked out, and our glossary covers early termination of a lease.
Is the payout figure the same as the account balance?
Not necessarily. The figure shown on a statement or online account can be different from the amount required to end the agreement on a particular date. Ask the financier for a current payout figure before committing to a sale, trade-in or refinance, and confirm how long that figure is valid and whether any early-termination, administration or discharge amount is included (broker-desk observation, September 2026).
What happens if the payout is more than the trade-in value?
The shortfall still has to be dealt with. If a dealer offers less for the asset than the amount required to clear the existing finance, the difference is sometimes called negative equity. Do not assume it disappears into the replacement finance. Ask for the old payout, the trade-in value and the amount proposed to be financed on the replacement as 3 separate dollar figures so you can see whether the shortfall is being paid in cash or rolled into the new transaction (broker-desk observation, September 2026).
What should you check when buying from a private seller?
Check the PPSR for existing finance before any money moves: for a motor vehicle, the PPSR says to search the correct VIN or chassis number on the day of purchase or the day before. For other serial-numbered property, the search should be done immediately before the purchase or lease. If a private-sale vehicle has a valid security interest and you buy without the relevant PPSR search, that interest can remain enforceable and the asset may be at risk of repossession.
If a search shows existing finance, do not simply pay the seller and assume the old lender will remove it later. Confirm the settlement path with the seller, the existing financier and the incoming financier before money moves. The secured party is required to end its PPSR registration when its security interest in the collateral ends, and for serial-numbered goods it must do so within 5 business days.
Sources: Personal Property Securities Register, Do a used car or vehicle search, How the PPSR protects buyers and lessees and End a registration, read 2 October 2026.What happens to GST and depreciation when you later sell or trade the asset?
For a GST-registered business, selling or trading a business asset such as equipment or a motor vehicle is usually a taxable sale, so GST is generally included in the disposal. Separately, selling a depreciating asset is normally a balancing adjustment event for income tax. The tax office compares the asset's termination value with its adjustable value: if the termination value is higher, the difference is generally assessable income; if it is lower, the difference is generally deductible.
Mixed business and private use changes that calculation. The balancing adjustment amount is reduced for the non-taxable-use proportion and there can also be capital-gains-tax consequences. If the asset is a passenger car to which the car limit applied, the tax cost used in the depreciation calculation may already have been capped, so have your accountant model the disposal rather than assuming the finance payout is the tax result.
Assume a GST-registered business trades a vehicle for $33,000 including GST and the existing finance payout is $24,000. The $9,000 difference is the commercial equity left after clearing the finance, before considering the replacement transaction. For depreciation, the termination value is generally worked out net of GST payable, so the tax value in this simple example starts at $30,000. If the vehicle's adjustable value immediately before disposal were $18,000, the difference would generally be a $12,000 assessable balancing adjustment. The $24,000 finance payout does not replace that tax calculation. These figures are illustrative only and ignore mixed use, the car limit and other adjustments.
The Personal Property Securities Register (PPSR) entry is made by the financier, and our insight explains how the PPSR registration happens at settlement.
Does a lease show on your balance sheet?
Yes, in most cases: if your business prepares financial statements that apply AASB 16, a lease is recognised as a right-of-use asset and a lease liability, unless the standard's short-term or low-value exemptions apply (AASB 16, read October 2026). A lease therefore does not automatically stay off the balance sheet.
AASB 16 says that at the commencement date "a lessee shall recognise a right-of-use asset and a lease liability" (paragraphs 22 to 49 set out how). A right-of-use asset is the lessee's right to use the leased asset for the lease term. The standard lets a lessee elect not to apply that recognition model to short-term leases and leases of low-value assets (paragraphs 5 to 8).
Source: Australian Accounting Standards Board, AASB 16 Leases, compilation November 2022, read 2 October 2026.A hire purchase goes on your balance sheet as an asset with a matching liability either way, but whether it is recorded as owned plant and equipment or as a right-of-use asset under AASB 16 depends on its terms, so confirm the treatment with your accountant.
Accounting and tax treat a lease differently. The lease sits on the balance sheet under AASB 16, but for tax the business still deducts the rentals, unless it is a car over the car limit, and the financier holds the asset.
What does each structure do to your next loan?
Each structure reduces what you can borrow next, because lenders read a lease rental and a chattel repayment alike as a monthly commitment when they assess your next loan (broker-desk observation, September 2026). Choosing a lease does not make the debt disappear from the assessment. That room left for the next loan is what the serviceability test measures, whether the next application is for a vehicle or for equipment finance.
Where this commonly lands (broker-desk observation, September 2026)
- Most business vehicle and equipment deals we see settle as chattel mortgages, because the owner wants the asset, the GST back early and the deductions in the business's name.
- Finance leases come up where a business prefers a fixed rental and plans to hand the asset back or refinance the residual.
- Rentals are most common on technology and office equipment replaced on a cycle.
- Commercial hire purchase is offered mainly through bank business banking and asset finance divisions, though not every bank offers it, while many non-bank asset financiers focus on chattel mortgages, leases and rental, so the practical choice for most businesses is between a chattel mortgage and a lease.
General information from practice, not a recommendation for your business and not a prediction of what a lender will offer.
What if your business prepares special purpose accounts?
If your accounts are special purpose or tax-only, how leases are presented is a question for your accountant. AASB 16's recognition rules apply in full to general purpose accounts, including the simplified-disclosure (Tier 2) version: entities applying AASB 1060 "are required to apply all the recognition and measurement requirements in Australian Accounting Standards and apply this Standard in relation to disclosure requirements only".
Source: Australian Accounting Standards Board, AASB 1060, compilation No. 8, 31 December 2025, for periods from 1 January 2026, read 2 October 2026. Tier 2 general purpose statements only.Which structure fits how your business uses the asset?
Own it through a chattel mortgage if you will keep the asset for most of its working life; lease or rent it if you replace it on a cycle and want a fixed outgoing. Then compare the GST timing, deductions, balloon or residual, fees, total repayments and early-exit terms, and check the contract type named on the quote before you sign. The best fit also depends on how you will exit the asset, not just the monthly repayment, so work through these checks:
- Ownership. Do you need to own the asset, sell it later or use its resale value toward the next purchase?
- Replacement cycle. Will you keep it for most of its working life, or replace it every few years?
- Modification and control. Do you need to fit a body, shelving, signage, attachments or other modifications that a lease may restrict?
- GST and deductions. Check your GST registration, accounting basis, business-use percentage and the car limit with your accountant.
- End amount. Compare any balloon or residual with the asset's likely value when the term ends, not only the monthly repayment.
- Next borrowing need. Ask how the repayment or rental will be treated when you next need a vehicle, equipment, working capital or property finance.
This tradie example shows how those checks play out on two assets bought in the same month.
A tradie running a small civil works business needed a new ute and a compact excavator in the same month, and asked whether to use a chattel mortgage, a finance lease or a rental. Keeping both for most of their working life and wanting the GST back early pointed to a chattel mortgage; a rental only made sense for the excavator if it would be replaced on a short cycle.
| Structure | GST credits | When they come back | Year-one deductions | At the end |
|---|---|---|---|---|
| Chattel mortgage | $13,000 | In full, on the activity statement for the purchase period | Decline in value of both assets, plus the interest paid; neither qualifies for the instant asset write-off, because each costs more than the write-off threshold | The business owns both; any balloon is paid |
| Finance lease | The GST in each rental; the total tops $13,000 only with a low or nil residual, or once the GST on any end-of-term buyout is counted, because the payments also carry the financier's charges | Spread across the term, with each rental | The rentals paid in the year | Use the contract's end option: purchase if permitted, refinance, return or upgrade |
| Rental | The GST in each rental | Spread across the term, with each rental | The rentals paid in the year | Return, upgrade or extend |
Illustrative only. Assumes a GST-registered business on an accruals basis, a ute at $66,000 and a compact excavator at $77,000, both including GST and both used only for the business; the ute is under the car limit. Hire purchase is left out of this example. Your accountant confirms the tax outcome.
The outcome: the ute on a chattel mortgage, and the excavator decided on how long it will be kept. There are more finance guides for tradies in our hub.
Does it matter whether a sole trader, company or trust signs?
It matters because the entity that signs holds the asset (or the lease) and claims the credits and deductions. The right entity is a question for your accountant before you sign.
What if the asset is partly private?
If the asset is partly private, you apportion the GST credits and the deductions by business use. Your accountant confirms the business-use share and the records that support it.
Is business-purpose finance covered by consumer credit law?
Generally no: the National Credit Code applies to credit provided "wholly or predominantly" for personal, domestic or household purposes, or for residential investment property. Finance for a business purpose sits outside it. This is not legal advice.
Source: ASIC, National Credit Code, updated 1 August 2025, read 2 October 2026.A café owner replaces the espresso machine on a regular cycle as models change. A rental keeps the upgrade path open and spreads the GST; a chattel mortgage gives ownership and the deductions in the business's name. The deciding question is whether the machine will still be in use at the end of the term. More finance guides for café owners are in our hub.
A manufacturer that prepares general purpose accounts wanted to lease a CNC machine to keep the debt off its balance sheet. Under AASB 16 the lease still goes on the balance sheet, and the bank reads the rentals as a commitment. The choice came back to ownership, GST timing and what happens at the end. Our insight compares lease, rental, chattel or CHP for manufacturing equipment.
The same thinking scales to bigger fleets; read fleet leasing vs chattel mortgage for truck operators, or see equipment finance for your business.
If you have a quote in hand and are still choosing, a broker can match the structure to how long you will keep the asset and price it across a lender panel before you sign.
What should you check before you sign?
Before you sign, confirm the contract type, the total cost, the end amount, the early-exit terms and which entity should sign. For what a chattel mortgage quote should cost, our guide sets out current chattel mortgage rates and fees.
Is the dealer's "lease" really a lease?
Not always. At the dealership, "lease" is often used loosely for any vehicle finance (broker-desk observation, September 2026). Check the contract type named on the quote: a chattel mortgage is a loan and your business owns the asset from settlement, while a finance lease leaves the financier as owner. The contract type, not the word on the brochure, decides when you get the GST back and who claims the deductions.
Questions to ask about any finance quote
- What is the contract? A chattel mortgage, a finance lease, a rental or hire purchase.
- What cash goes in on day one? Show the deposit, trade-in or other contribution separately.
- What amount is actually being financed? Separate the asset price, GST, fees and any old-finance shortfall rather than giving only one facility figure.
- When does the GST credit arise? Up front on the purchase or hire purchase, or progressively across lease rentals, subject to your GST basis and eligibility.
- What is the interest or rental rate, and is it fixed? Do not compare rates across different structures without also comparing the dollar cost.
- What are all the fees, in dollars? Include lender, dealer, broker, documentation, establishment and any settlement-related fee that applies.
- What is the total of all scheduled payments? Include the deposit, regular payments, fees and the balloon or residual so competing quotes are on the same basis.
- What is owed at the end? Put the balloon, residual or final instalment in dollars and explain whether paying it gives ownership or only an end-of-term option.
- What does leaving early cost? Ask how the payout or early-termination amount is calculated, whether it changes by date, and what happens on a refinance or trade-in.
- What if the asset is worth less than the end amount? Confirm who carries that resale-value risk and what choices the contract gives you.
Compare quotes on cash in, amount financed, total scheduled payments, end amount and exit cost, not only the monthly repayment. A bigger balloon can make the monthly payment look cheaper while increasing the amount still owing at the end. ASIC's June 2026 review of consumer car loans found they typically carried two establishment fees, one from the lender and one from the distributor, such as the dealer or broker (ASIC, 24 June 2026); that review covered consumer loans, but the line-item comparison is also a useful discipline on a business quote.
Questions to take to your accountant before you sign
- Which entity should sign? Sole trader, company or trust.
- Is the business registered for GST, and does it account on a cash or accruals basis?
- Does the asset count as a car for the car limit?
- Will the asset be in use by 30 June if you want the deduction this income year?
- How will a lease show in your accounts, and does your bank read them against any covenant?
What will the lender usually ask for after you choose the structure?
The lender will usually ask for the business's ABN and entity details, director or guarantor identification, the supplier quote or tax invoice, recent trading or financial information, details of existing commitments, and information about the asset itself. The structure is only one part of approval, and the exact evidence depends on the lender, the business history, the asset and the size of the request. If you run a trade business, start with our tradie loan pack for ute and equipment finance.
A dealer purchase is usually simpler to verify than a private sale. On a used or privately sold vehicle or machine, expect extra checks around ownership, registration, value, condition and any existing PPSR security before settlement. Asset age can also change lender appetite or the available term, because an older vehicle or machine may have a shorter remaining economic life (broker-desk observation, September 2026). Do not pay a private seller on the assumption that the incoming lender will automatically clear old finance.
Does it matter when in the year you buy?
Yes, for the deduction: under the write-off's first-use test, an asset ordered in June but delivered in July falls into the next income year. On an accruals basis, the GST credit on a purchase lands in the activity statement for the period of the invoice or first payment. Your accountant confirms the timing for your business.
Where to go next
- New ABN or a recent knock-backWhy business loans get declined on a new ABN
- Buying a car, ute or vanBusiness vehicle finance
- Buying plant or equipmentEquipment finance
- Getting ready to settleWhat happens at settlement
Each link answers the question people most often ask next.
How is a novated lease different from a chattel mortgage?
A novated lease is an employee arrangement, not business finance: an employer, an employee and a financier sign a three-way deed of novation so the employee can salary package a car.
- Who signs: the employee, the employer and the financier.
- What it is for: a car the employee uses, packaged through salary. The tax office notes that "Car leasing is commonly done through a novated lease in a salary sacrifice arrangement".
- How it is taxed: a bona fide novated lease is a car fringe benefit, taxed under the fringe benefits tax rules.
Can a sole trader have a novated lease?
No. A novated lease needs an employer, so a sole trader or partner cannot have one, but a director paid through their own company can, because the ATO counts a company director as an employee for FBT. Your accountant can confirm which fits your structure.
Source: ATO, How fringe benefits tax works, updated 17 July 2024, read 2 October 2026.A business buying a vehicle in its own name chooses between a chattel mortgage, a lease and hire purchase instead, and the novated lease stays a salary packaging decision for the employee.
A chattel mortgage and hire purchase generally put the asset and its tax deductions with your business, while a finance lease or rental leaves the financier as owner and usually spreads the GST and deductions across the rentals. For accounts that apply AASB 16, most leases also go on the balance sheet.
Key takeaway: own it if you will keep it for most of its working life, lease or rent it if you replace it on a cycle, then compare the total quote and confirm the GST, tax and accounting treatment before you sign.Frequently asked questions
Chattel mortgage vs lease comes down to ownership and GST timing. With a chattel mortgage your business owns the asset from settlement and generally claims the GST up front; with a lease the financier owns it and the GST comes back with each rental. Our glossary explains what a finance lease is.
Neither is better for tax in every case; the difference is who claims what, and when. Under a chattel mortgage your business claims the decline in value and the interest, plus the instant asset write-off if the asset qualifies, and generally the full GST credit up front. Under a lease it deducts the rentals and claims the GST with each rental, unless it is a car over the car limit, which the ATO taxes as a notional sale and loan. Your accountant confirms which suits your tax position. Our glossary explains decline in value.
On hire purchase vs chattel mortgage, neither is better in general: both put the asset with your business for tax, so you claim the decline in value and the interest. The differences are that hire purchase delays title until the final payment and its up-front GST credit also covers the interest and fees, while a chattel mortgage gives you title from settlement. Our commercial hire purchase guide covers the detail.
No, you cannot claim the GST up front on a finance lease. The tax office treats each lease payment as a separate purchase, so the credit comes back with each rental, in the period it falls due or is paid. Our glossary covers GST credits.
Generally yes, if your financial statements apply AASB 16: a finance lease goes on the balance sheet as an asset and a matching lease liability, unless a short-term or low-value exemption applies. Whether AASB 16 applies to your accounts is a question for your accountant. For borrowing, see the section on what each structure does to your next loan; our glossary covers how lenders test serviceability.
A chattel lease is not a separate product. The phrase usually mixes up a chattel mortgage, which is a loan where your business owns the asset from settlement, with a finance lease, where the financier owns the asset and your business pays rentals. Check the contract type named on the quote, because it decides who claims the GST and the deductions. Our glossary explains what a chattel mortgage is.
It depends on how you are paid, because novated lease vs chattel mortgage is really a choice between salary packaging and business finance. A novated lease needs an employer, so it can suit a director paid a salary through their own company, but not a sole trader or partner. A chattel mortgage is the business's own finance for a vehicle used in the business. Your accountant compares the FBT and tax outcome. Our glossary explains how a novated lease works.
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