Commercial Hire Purchase Australia: How It Works, GST, Tax and Payout
Equipment Finance
Australian Guide
Commercial hire purchase lets a business use a vehicle or equipment now while the financier keeps legal title until the final payment. This guide covers GST, Division 240, approval, used assets and private sales, deposits, balloons, payout, refinance, default, PPSR and what happens if the asset or business changes before the term ends.
Quick Answer
Commercial hire purchase is business asset finance where the financier buys a vehicle or equipment, your business uses it, and legal title passes to you after the final payment, including any balloon. On agreements entered into from 1 July 2012, a GST-registered business claims the full GST credit up front, including GST on the credit charge, whether it reports on a cash or non-cash basis. For income tax, Division 240 treats it as a purchase with a loan, so you claim depreciation from when the asset is first used or installed ready for use, not from when you sign. Because it is business finance, the National Credit Code does not apply: your contract sets the early payout figure and default terms, with the unfair contract terms law as a backstop for small businesses.
Also called: commercial hire purchase (CHP), equipment hire purchase or business hire purchase. These names usually describe the same business-purpose structure. Consumer hire purchase is different because consumer credit rules can apply where the purpose is personal, domestic or household.
How does commercial hire purchase work in Australia, and when does ownership pass?
Under commercial hire purchase, the financier buys the asset, your business takes possession and pays instalments, and legal title normally passes only after the final required payment. That ownership timing is the key legal difference from a chattel mortgage, where the business generally owns the asset from the start and the lender takes security over it.
- You choose the asset and supplier. This can be a vehicle, truck, plant, machinery or other business equipment that the lender accepts.
- The financier approves the transaction and buys the asset. The financier becomes the legal owner under the hire-purchase structure.
- Your business takes possession and uses it. The agreement can include a deposit, scheduled instalments and a final balloon.
- You make the contracted payments. The financier keeps legal title while the agreement is on foot.
- Title passes after the last required payment. If there is a balloon, title does not normally pass until that balloon is paid too.
The National Credit Code is primarily directed to credit provided to individuals for personal, domestic or household purposes. A genuine business-purpose hire purchase is therefore generally outside the consumer-credit regime, which makes the contract especially important for payout, default, use of the asset and enforcement. ASIC explains the business-purpose distinction in its guidance on when the national credit laws apply.
A builder finds an excavator, gets a supplier quote and asks for asset finance. The lender assesses the business and the machine, then buys the excavator and hires it to the builder. The builder uses it on jobs and pays the agreed instalments. If the contract includes a final balloon, the builder does not receive legal title until that amount is paid as well.
If the builder wants to sell, trade or refinance the excavator before then, the financier must usually be involved because it still owns the asset.
If you are still choosing the legal structure rather than trying to understand an existing contract, compare chattel mortgage vs lease vs hire purchase before signing anything.
How does GST work on commercial hire purchase after 1 July 2012?
For a commercial hire purchase entered into on or after 1 July 2012, a GST-registered business claims the full GST credit up front, in the tax period of the first payment or the tax invoice, whether it accounts on a cash or non-cash basis. Every component is taxable, including the credit charge, and associated fees such as late payment fees also carry GST when they are charged. Agreements entered into before 1 July 2012 follow older rules, but any such agreement is now more than 14 years old, so for most live agreements the post-2012 rules are the ones that apply.
You may still read, including on at least one major bank's help page, that hire purchase suits businesses that account for GST on an accruals basis. That reflects the pre-2012 rules. For agreements from 1 July 2012, the ATO lets a cash-basis hirer claim the credit up front in the same way as an accruals-basis hirer.
Does a cash-basis business claim hire-purchase GST over the repayments?
No, not for a hire purchase entered into from 1 July 2012. The ATO's current guidance says a cash-basis recipient can claim input tax credits in the same way as a non-cash recipient for these agreements. The progressive principal-only treatment belongs to pre-July-2012 agreements.
Is GST charged on the interest or credit charge?
Yes, on post-1 July 2012 hire purchase agreements the credit component is generally taxable rather than input taxed. That is why the GST credit can include the taxable credit component as well as the goods. Later contingent fees or adjustments are dealt with when they arise, so do not assume every possible future fee has already produced an input tax credit on day one.
What if the business is not registered for GST?
It cannot claim an input tax credit, but that fact alone does not automatically make hire purchase the wrong structure. You still compare ownership timing, lender availability, deposit, cash flow, asset life, payout flexibility and the alternative finance structures available to your business.
| Agreement | Non-cash basis | Cash basis | Not GST registered |
|---|---|---|---|
| On or after 1 July 2012 | Full credit on the goods and the credit charge up front, in the period of the first payment or tax invoice | Same as non-cash: full credit up front, not instalment by instalment | No credit to claim |
| Before 1 July 2012 | Credit on the principal only; a separately disclosed interest charge carries no GST, and an undisclosed one makes the total payable taxable | One-eleventh of each instalment's principal, in the period paid | No credit to claim |
Sources: Australian Taxation Office, GST, hire purchase and leasing (last updated 6 April 2017); ATO legal database, GSTR 2000/29 and the Financial services GST issues register. Read 30 September 2026. General information; your accountant confirms the treatment and timing for your agreement.
Is the GST credit capped when the asset is a car?
Yes, for cars. For 2026-27 the car limit is $69,883, and where a car costs more, the most GST credit you can generally claim is $6,353, one-eleventh of the car limit. The same $69,883 limit also caps the cost you can use to work out depreciation on a car first used or leased in 2026-27. Heavy trucks and most plant are not cars for this rule. The limit is indexed each 1 July. Source: Australian Taxation Office, Car thresholds from 1 July, published 9 June 2026, read 30 September 2026.
What changes when the hire purchase is for a car or ute?
Three more rules can apply to a car. Luxury car tax is built into the price of a car above the 2026-27 threshold of $80,809, or $91,661 for a fuel-efficient car, and you cannot claim a GST credit for the luxury car tax itself, even for business use. Fringe benefits tax can apply where the hirer is a company or trust and an employee, which can include a working director, uses the car privately; utes and panel vans are exempt where private use is limited and the load rules are met. And only the business-use portion of a car's cost is claimable, so keep a logbook. For these rules a car carries less than one tonne and fewer than nine passengers, so heavier trucks and plant generally fall outside them. Sources: Australian Taxation Office, Car thresholds from 1 July (9 June 2026) and Types of vehicles that are exempt cars (last modified 12 June 2026), both read 30 September 2026.
A GST-registered earthmoving business signs a commercial hire purchase in October 2026 for an excavator with a cash price of $220,000 including GST. The contract sets the total payable at $264,000, including the credit charge. Because the agreement is from after 1 July 2012, the business claims one-eleventh of the total payable, $24,000, in the BAS period of its first payment, whether it reports on a cash or non-cash basis. That is why the GST credit is bigger than the $20,000 in the cash price.
For income tax, Division 240 treats the business as having bought the excavator with a loan. It holds the machine for depreciation from when it is first used, on a cost of $200,000 (the price less the GST credit on the price). The instant asset write-off is not available because the machine costs more than $20,000; if the business uses the small business simplified depreciation rules, the machine goes into the pool at 15% in its first income year. The finance charge in year one's instalments, shown in the contract's schedule, is the notional interest the business deducts, subject to s 240-50.
The same machine on the same agreement, for a business that is not registered for GST: it pays the $24,000 of GST and claims none of it. Illustrative figures, not a rate or an offer; your accountant confirms the numbers for your own agreement.
How is commercial hire purchase treated for income tax and 30 June timing?
Division 240 broadly treats a hire purchase as a notional sale of the goods to the hirer combined with a loan from the financier. Where the holding rules are satisfied, the hirer can generally claim decline-in-value deductions even though the financier still has legal title.
- Depreciating asset holder. TR 2005/20 explains that a hire-purchase hirer can be the holder for Division 40 where it is reasonable to conclude the hirer will acquire the asset or otherwise meets the relevant holding test.
- Finance component. Division 240 separates the financing element from the notional acquisition, so the deductible finance component is not simply the whole repayment.
- Instant asset write-off. From 1 July 2026 the instant asset write-off is permanent: a business with aggregated turnover under $10 million can immediately deduct eligible assets costing less than $20,000, per asset, that are first used or installed ready for use in the income year. On a hire purchase it is available only where your business is treated as holding the asset.
- Assets of $20,000 or more. A small business using simplified depreciation puts them into the small business pool, deducted at 15% in the first income year and 30% each year after. Most financed plant and trucks land here.
Does signing a hire purchase before 30 June get the tax deduction this year?
No, signing alone is not enough for decline-in-value deductions. Depreciation starts when the asset is first used or installed ready for use for a taxable purpose. A machine signed for in June but delivered and commissioned in July generally starts on the next income year's clock instead.
What should you keep if 30 June timing matters?
Keep the signed agreement, tax invoice, delivery docket, installation or commissioning record and evidence of first business use. If the timing is material, ask the supplier to confirm the expected delivery or commissioning date before you sign rather than relying on an estimate in a sales conversation.
| Rule | What it changes | Practical question | Primary source |
|---|---|---|---|
| Division 240 | Treats hire purchase broadly as a notional sale plus a loan | How is the asset purchase separated from the finance component? | ITAA 1997 Div 240 |
| Division 40 holding rules | Determines who can claim decline in value | Is the hirer treated as the holder? | ITAA 1997 s 40-40; TR 2005/20 |
| Start time for decline in value | Starts when first used or installed ready for use | Was the asset genuinely ready before 30 June? | ITAA 1997 s 40-60 |
| Instant asset write-off | Immediate deduction for eligible assets below the threshold | Is the business eligible, is the asset below $20,000, and was it ready for use in the income year? | ATO, $20,000 instant asset write-off |
| Notional interest, s 240-50 | The finance charge is deductible as interest | Would the payments be deductible if none were capital? | ITAA 1997 s 240-50 |
| Car limit, 2026-27 | Caps the GST credit at $6,353 and the depreciable cost at $69,883 | Is the vehicle a car, and does it cost more than the limit? | ATO, Car thresholds from 1 July |
Sources: Australian Taxation Office, TR 2005/20; $20,000 instant asset write-off, now law, page last updated 27 August 2026; Car thresholds from 1 July, 9 June 2026; Income Tax Assessment Act 1997, Divisions 40 and 240 (ATO legal database). All read 30 September 2026. General information, not tax advice.
Is commercial hire purchase better than a chattel mortgage or lease for your situation?
Commercial hire purchase is not automatically better or worse than a chattel mortgage or lease. The right comparison starts with the outcome you want: who should own the asset during the term, whether you expect to keep it, how often you replace equipment, what finance your lender actually offers and how your accountant wants the transaction treated.
| Question | Commercial hire purchase | Chattel mortgage | Finance lease |
|---|---|---|---|
| Who legally owns the asset during the term? | Financier | Business generally owns it from the start, subject to lender security | Financier |
| Do you normally own it automatically at the end? | Yes, after the final required payment under the contract | You already own it, subject to discharge of the lender's security | Not necessarily; end-of-term options depend on the lease |
| Can a balloon or residual be used? | Yes, a balloon can reduce regular instalments | Yes, a balloon can often be used | A residual is commonly part of the lease structure |
| What if you want to sell or upgrade mid-term? | Financier involvement is normally required because it owns the asset | Payout and discharge are normally required because the lender has security | Lease exit or end-of-term rules govern the change |
| How available is the structure? | Still offered by some Australian banks, but less prominent than equipment loans on many lender sites | Widely promoted across bank and non-bank asset finance | Available for selected assets and borrowers |
When can hire purchase make sense?
It can make sense when you want to own the asset at the end, are comfortable with the financier keeping title during the term, the lender offers hire purchase for your asset and the contract gives you acceptable payout and balloon terms.
When should you look at another structure?
Look harder at alternatives when you want title from day one, expect to replace the asset before the term ends, want a return-or-upgrade style end point, or can access materially better lender options through a chattel mortgage or lease. Being unregistered for GST is a tax difference, not by itself a reason to reject hire purchase.
Hire purchase can fit when
- You want to own the asset at the end
- You are comfortable with financier title during the term
- The asset is likely to stay in the business for the term
- The lender offers an acceptable balloon and payout structure
Compare another structure when
- You want legal title from day one
- You expect to sell or upgrade early
- You want lease-style return or upgrade options
- Your lender has stronger policy or pricing on another asset-finance structure
For the deeper side-by-side analysis, use our chattel mortgage vs lease vs hire purchase guide.
What do Australian lenders check before approving commercial hire purchase?
Lenders assess both the business and the asset. Expect them to look at the business purpose, ABN and entity, credit history, repayment capacity, existing commitments, the asset's type and age, the supplier, the amount financed, the term, any balloon or deposit and whether guarantees are required. A decline can therefore be about the structure, the asset, the supplier or the business rather than commercial hire purchase as a concept.
Can a sole trader, company, partnership or trust use hire purchase?
Potentially, but lender policy varies. The practical starting point is to put the agreement in the entity that will actually use the asset and account for the transaction, unless the lender and your accountant advise a different structure. A company or trust may also involve director or guarantor requirements that do not arise in exactly the same way for a sole trader.
What is the difference between full-doc and low-doc commercial hire purchase?
There is no single industry-wide document list. A full-doc assessment can use financial statements, tax returns and other evidence of business performance, while a streamlined or low-doc path may rely more heavily on ABN history, GST status, business bank statements, BAS, asset strength, credit profile and lender-specific declarations. Low doc means a different evidence path, not no assessment, and the available path depends on the lender, asset and file.
Can a newer business get commercial hire purchase?
Sometimes, but a shorter trading history can narrow the lender set or increase the evidence required. A lender may place more weight on bank conduct, contracts or invoices, the directors' experience, deposit or trade-in, asset resaleability and the overall strength of the transaction. Do not buy the asset first on the assumption that a new ABN will automatically qualify.
Do you need a deposit for commercial hire purchase?
Not always. Some lenders advertise no deposit: ANZ's business hire purchase page, for example, lists $0 deposit for approved applicants, but that does not mean every transaction qualifies for 100% finance. A lender can still require a contribution because of the business profile, asset age, supplier, amount financed or expected value at the end of the term.
Can you use commercial hire purchase for used equipment, a private sale or an auction?
Sometimes, but these transactions can need more checking than a straightforward dealer purchase. The lender may need to verify the seller, ownership, serial or VIN details, value and condition, and it may set limits around asset age at the start or end of the term. Run a PPSR search on a used or privately purchased asset before committing, because an existing security interest can complicate settlement or expose the buyer to avoidable risk.
What can go wrong with an auction, private seller or overseas supplier?
The biggest risk is becoming committed to buy before the financier is ready to settle. Auction deposits can be non-refundable, a private seller may not have lender-ready invoices or proof of ownership, and an overseas supplier can add currency, shipping, title and documentation issues. If the supplier wants a deposit or progress payment before final delivery, confirm in writing that the lender can fund that payment pattern before signing the purchase contract.
Can freight, installation or accessories be included?
Sometimes, where the lender accepts those costs as part of the financed asset transaction. The answer depends on whether the cost is capitalised into the supplier invoice, whether it becomes part of the asset, and lender policy. Get the quote itemised before approval so the financed amount is not increased after the lender has assessed a different transaction.
What documents should you have ready?
Start with the supplier quote or invoice, business and entity details, identification and whatever evidence the lender requests to verify repayment capacity. For self-employed businesses, that can include BAS, business bank statements, financial statements, tax returns, cash-flow forecasts or evidence of contracts. For a private sale or unusual asset, also expect seller identification, ownership evidence, serial details, valuation or PPSR evidence if requested.
| Item | Why the lender wants it | What can change the answer | Customer action |
|---|---|---|---|
| Supplier quote or invoice | Confirms asset, price, supplier and GST | Private sale, auction, import or progress payment | Get exact asset and payment details before committing |
| ABN and entity details | Confirms who will be the hirer | New entity, trust, partnership or recent ownership change | Use the entity that will actually operate the asset |
| Income and cash-flow evidence | Supports repayment capacity | New business, seasonal income, recent decline or low-doc path | Have BAS, bank statements or financials ready if requested |
| Asset age, condition and use | Drives term, balloon and resale-risk policy | Old, specialised, high-use or privately sold equipment | Ask whether age at the end of the term matters |
| Deposit, trade-in and balloon | Changes amount financed and repayment profile | Asset value, business strength and lender policy | Compare more than one structure before choosing the lowest instalment |
Who still offers commercial hire purchase in Australia?
Commercial hire purchase is still sold by major banks. ANZ publishes a business hire purchase product for assets used mostly for business, with a $7,500 minimum, terms of 1 to 7 years and no deposit advertised. Westpac lists hire purchase alongside finance leases and goods loans in its equipment finance range, and the quote tools of its St.George and BankSA brands offer hire purchase for vehicles and equipment used wholly or mainly for business. The non-bank asset lenders we place with mostly write chattel mortgages, leases and rental instead, so availability is a lender-policy question, not a sign that hire purchase has disappeared.
Current lender examples read 30 September 2026: ANZ, Hire purchase; Westpac, Equipment finance; St.George, Vehicle and equipment finance quote. Lender pages are examples of current market availability, not recommendations or promises of approval.
What we see on the panel (indicative, September 2026)
On the non-bank asset-finance panel we work with, chattel mortgage, finance lease and rental are more common than commercial hire purchase. When a client asks specifically for HP, the practical exercise is often to compare the legal and tax outcome they want against a chattel mortgage and then see which lenders will actually write the asset and file.
Indicative only, from one broker's panel as at September 2026. It is not a statement about every Australian lender and not a recommendation of one structure over another.
What if the bank declines the hire purchase?
Ask what failed before you apply somewhere else. A decline can be about the business, the asset, the requested term, the balloon, the supplier or the hire-purchase structure itself. If the asset and repayment position are otherwise acceptable, a chattel mortgage from a different lender can sometimes solve a structure or policy mismatch without changing the equipment you are buying.
How should you structure the deposit, term, repayments and balloon?
Do not choose commercial hire purchase by chasing the lowest periodic repayment. A deposit or trade-in reduces the amount financed, a longer term can reduce the regular repayment but keep the debt outstanding for longer, and a larger balloon pushes more of the obligation to the end. Compare the whole contract, including total payable, fees, early payout method and what happens if the asset must be sold or replaced early.
Can repayments be monthly, quarterly or seasonal?
It depends on the lender and asset-finance program. Monthly repayments are common, while some business or agricultural finance can offer other schedules. Do not assume a seasonal or annual pattern is available just because the business has seasonal income. Ask for the actual repayment schedule before signing and test it against the months when cash flow is weakest.
Is commercial hire purchase fixed or variable rate?
Many asset-finance agreements are quoted on a fixed repayment basis, but the legal rate and adjustment mechanics are contract-specific. Read the finance schedule rather than relying on a sales description. If rate certainty matters, confirm whether the instalments can change and what events can change fees or other amounts payable.
What does a larger balloon do to the repayments?
A larger balloon generally reduces the scheduled repayments because more of the amount is left to maturity, but it also leaves a larger amount to fund, refinance or clear before title passes. The balloon should reflect expected asset life, resale value and the business's maturity plan, not just the monthly repayment target.
A business is buying equipment for $110,000 including GST and contributes $10,000, leaving $100,000 to be financed before any lender-specific fees or adjustments. One quote has no balloon and another leaves $25,000 to the final payment. The second quote will normally produce lower scheduled repayments because more principal remains outstanding at maturity, but the business must still find or refinance that $25,000 before title can pass.
The right comparison is therefore not just the regular repayment. Put the total payable, balloon, payout method, asset value at maturity and likely replacement date beside each other.
| Structure choice | Usually changes | Main trade-off | Question to ask |
|---|---|---|---|
| Larger deposit or trade-in | Reduces amount financed | Uses more cash or equity now | "Does keeping that cash in the business matter more than reducing the debt?" |
| Longer term | Can reduce periodic repayment | Debt remains in place longer and must still fit asset life | "How old will the asset be when the agreement ends?" |
| Larger balloon | Can reduce scheduled repayments | Creates a larger maturity obligation | "Will I pay, sell or refinance the balloon?" |
| Extra repayments | May reduce outstanding debt | Contract may restrict or charge for early repayment | "How are extra payments applied and do they change the balloon?" |
What should you check in the contract before signing?
Confirm the product type, hirer entity, amount financed, total payable, repayment schedule, balloon, payout formula, fees, insurance obligations, permitted use, asset-change restrictions and delivery conditions. If the supplier wants a deposit or staged payment, make sure the finance approval and settlement process actually matches those dates.
What does the accountant need after settlement?
Give your accountant the signed contract, tax invoice, repayment schedule, delivery or commissioning evidence and any later payout, variation or adjustment documents. For a business vehicle, also keep the records needed to substantiate business use and any FBT position.
- Signed agreement. Shows the legal structure, hirer, balloon and contract terms.
- Tax invoice. Supports the GST treatment where a tax invoice is required.
- Repayment or amortisation schedule. Helps separate financing and principal amounts over time.
- Ready-for-use evidence. Supports the income year in which decline in value starts.
- Later adjustment documents. Keep payout quotes, interest rebates, variation letters and final statements.
What happens if you pay out, refinance, sell or default before the term ends?
Most mid-term problems come back to the same fact: the financier still owns the asset and the contract sets the exit mechanics. Before selling, trading, refinancing, changing entities or relying on an insurance payout, get the financier involved early and confirm the required payout, consent and title steps in writing.
Can you pay out commercial hire purchase early?
Usually yes if the contract permits it. Ask for a written payout figure, check the valid-to date, identify any early termination cost and ask whether unearned credit charges are rebated. The ATO notes that an interest rebate on an early payout of a post-2012 agreement can create a GST adjustment for the hirer.
Can you refinance hire purchase into a chattel mortgage?
Potentially, but the replacement is a new finance transaction rather than a simple relabelling. The existing HP generally needs to be paid out, title and security need to be dealt with, and the new lender must approve the borrower and asset. Ask your accountant about any GST adjustment and your broker about whether the refinance saves enough to justify payout and establishment costs.
Can you sell, trade in, move or substitute the asset before the term ends?
Usually only with financier approval. Because the financier owns the asset, a trade-in or sale commonly requires a payout first or a lender-approved replacement process. Moving the agreement to another company or trust can also create a new or varied transaction, with tax and PPSR consequences.
What happens if the hire-purchase asset is stolen or written off?
Notify both the insurer and financier promptly. Because the financier still has an ownership and security position, the insurance claim and finance payout normally have to be coordinated rather than treated as two unrelated transactions. An insurance settlement may not equal the payout figure, so check whether the claim leaves a shortfall or surplus and who receives each amount under the policy and finance contract.
What if you sell the business or move the asset into another entity?
The agreement does not automatically transfer to the buyer, a new company or a trust. The financier approved a particular hirer and still owns the asset, so a business sale or restructure can require consent, payout, novation or a new finance transaction. Get the accounting and tax consequences checked before the entity change, not after the asset has already moved.
What happens if you miss repayments or default?
A genuine business-purpose commercial hire purchase does not automatically receive the consumer default-notice regime that applies to National Credit Code contracts. The agreement and the Personal Property Securities Act matter heavily, and secured-party enforcement can include taking and dealing with collateral. If a missed payment is likely, contact the financier before the due date and get any arrangement in writing. If a default or enforcement notice has already arrived, obtain legal advice promptly.
What happens if the business enters administration, liquidation or bankruptcy?
Insolvency does not make the financier's ownership or registered security interest disappear. PPSR guidance says a secured party can assert its security interest through the insolvency practitioner, subject to the PPSA, the finance contract and the insolvency process. The detailed outcome depends on the entity type, priority and facts, so treat insolvency as a legal-advice issue rather than assuming the asset simply becomes part of the general pool.
Can an unfair term in the contract be challenged?
Often, yes. Sitting outside the National Credit Code does not leave a small business without protection. The unfair contract terms law in the ASIC Act covers standard form contracts for financial products and services entered into, renewed or varied from 12 November 2016, where at least one party is a small business (fewer than 100 employees, or turnover under $10 million in the last income year) and the upfront price payable is no more than $5 million, with interest left out of that calculation. Terms that set the upfront price, such as the amount financed, the interest rate and disclosed establishment fees, cannot be challenged. Contingent fees such as default fees can, and so can terms like a broad right to vary the contract without a real chance to exit. A court can declare an unfair term void, and a financier can be fined for relying on one. ASIC's own examples use business loans and an equipment lease, so whether your hire purchase is covered is a question for your solicitor. If you think a term is unfair, complain to the financier first, then to the Australian Financial Complaints Authority if the financier is a member. Source: ASIC, Unfair contract term protections for small businesses (INFO 211), page modified 17 August 2026, read 30 September 2026.
How does the PPSR matter before purchase, during the term and after payout?
Before buying used or privately sold equipment, a PPSR search can reveal registered interests that need to be dealt with before settlement. During the hire purchase, the financier can register its own security interest. After the secured obligation ends, PPSR guidance says the secured party should end the registration promptly, generally within the applicable five-business-day period, so check that the registration has actually been discharged before a later sale or refinance.
| Event | Title | Payout | PPSR | Next action |
|---|---|---|---|---|
| Final payment at full term | Normally passes to the business | Agreement is satisfied | Registration should be discharged when no longer required | Keep final statement and check PPSR |
| Early payout | Passes according to the contract after payout | Written figure may include fees or rebates | Should be discharged once the secured obligation ends | Check GST adjustment if interest is rebated |
| Trade-in or sale | Financier still owns the asset until exit is completed | Usually needs to be cleared as part of the transaction | Existing registration must be dealt with | Coordinate financier, buyer/dealer and new lender |
| Default | Usually remains with financier | Contract determines outstanding amount | Registration supports secured-party rights | Get legal advice on notices and enforcement |
Sources: Australian Taxation Office, Financial services GST issues register; ASIC, Unfair contract term protections for small businesses; PPSR, Enforcing your security interests and End a registration; Personal Property Securities Act 2009. Read 30 September 2026. General information, not legal or tax advice.
If you want to exit cleanly
- Request the payout figure in writing
- Check the date the figure expires
- Confirm any early termination cost or rebate
- Coordinate title transfer before sale or trade-in
- Check the PPSR registration is discharged
Where problems usually start
- Assuming the statement balance is the payout figure
- Advertising the asset for sale before checking title
- Moving the asset to another entity without approval
- Leaving a balloon or refinance until maturity week
- Ignoring default or enforcement notices
Commercial hire purchase is two layers at once. Legally, the financier owns the asset until the final payment, including any balloon, and the contract sets payout, default and asset changes. For tax, a GST-registered business on an agreement from 1 July 2012 claims the full GST credit up front, and Division 240 treats the deal as a purchase with a loan, with depreciation starting when the asset is ready for use, not when you sign. Check both layers before you commit.
Key takeaway: choose the structure for the whole ownership cycle, not just the first monthly repayment.What else do Australian business owners ask about commercial hire purchase?
Business finance where a financier buys a vehicle or equipment and hires it to your business. You own the asset once you make the final payment, including any balloon.
No. Under a chattel mortgage your business owns the asset from day one and the financier takes security over it; under hire purchase the financier owns it until the final payment. Both let a GST-registered business claim the GST credit up front, but on a hire purchase from 1 July 2012 the credit also covers the credit charge.
No. The financier owns it until the final payment. For income tax, though, your business is usually treated as holding it, where you have it and it is reasonable to expect you will end up owning it.
Yes, for agreements entered into on or after 1 July 2012, if the business is registered for GST. The instalment-by-instalment rule for cash-basis businesses applied only to agreements entered into before 1 July 2012.
On agreements entered into on or after 1 July 2012, yes: every component, including the credit charge, is taxable. On agreements entered into before 1 July 2012, a separately disclosed interest charge is not.
Your business, where you have the asset and it is reasonable to expect you will end up owning it, because Division 240 treats the arrangement as a sale to you with a loan.
Only if your business is treated as holding the asset, your aggregated turnover is under $10 million, the asset costs less than $20,000 and it is first used or installed ready for use in the income year. The write-off is permanent from 1 July 2026.
Signing alone does not start depreciation. Depreciation, including the instant asset write-off, starts when the asset is first used or installed ready for use, so a machine signed for in June but delivered in July falls into the next income year. The GST credit follows its own timing: the tax period of your first payment or tax invoice.
Only in some cases. Fringe benefits tax applies where a company or trust provides a car that an employee, including a working director, uses privately. A ute or panel van is exempt where private use is limited and the load rules are met, so heavy private use can still create a fringe benefit.
As at September 2026, ANZ publishes a business hire purchase product with a $7,500 minimum and terms of 1 to 7 years, and Westpac and its St.George and BankSA brands offer hire purchase for business vehicles and equipment. Many non-bank asset lenders write chattel mortgages and leases instead.
Maybe. Extra repayments and early repayment are governed by the contract, and a fixed-payment agreement can include early repayment costs. Ask the financier how extra payments are applied and whether they reduce the term, reduce the payout or leave the balloon unchanged before sending extra money.
There is no universal settlement time. Timing depends on lender assessment, document completeness, the asset and supplier, and whether valuation, private-sale checks or payout of existing finance are involved. If the purchase has a deadline, ask the lender or broker for the remaining conditions rather than relying on a generic turnaround promise.
Once you pay the final instalment, including any balloon, title passes to your business. Check that the financier's PPSR registration has been removed and keep the final statement for your accountant.
Usually, yes, on the terms in your contract. Ask for a written payout figure, check any early termination fee and whether unearned interest is rebated, and confirm the PPSR registration is removed afterwards.
Ask what was declined: the structure, the asset or your file. A chattel mortgage from a non-bank asset lender is often the next place to look for the same asset, but every lender sets its own policy and approval depends on your file.
They can. The ASIC Act's unfair contract terms law covers standard form financial contracts with a small business, meaning fewer than 100 employees or turnover under $10 million, where the upfront price is no more than $5 million. Terms setting the price cannot be challenged, but contingent fees such as default fees can, and a court can declare an unfair term void.
No. The Code covers credit for personal, domestic or household purposes. A hire purchase for your business sits outside it, so your contract sets most of your rights, although a small business on a standard form contract is also protected by the unfair contract terms law in the ASIC Act.
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