Both let you use the equipment from day one. The difference is ownership timing — and that changes everything about tax. Here's how to choose the right structure.
This is the core distinction that everything else flows from.
You purchase the equipment and own it immediately. The lender provides the funds and takes a "mortgage" (security interest) over the equipment until the loan is repaid. Think of it like a home mortgage — you own the house, the bank holds security.
The lender purchases the equipment and hires it to you over an agreed term. You make regular hire payments. At the end, you pay a residual amount (as low as $1 in some contracts) and ownership transfers to you.
In both cases, you have full use of the equipment from day one. The difference is a legal one — who holds title during the loan term. Why does this matter? Because ownership determines your tax position — who claims depreciation, how GST is treated, and whether the instant asset write-off applies.
| Factor | Chattel mortgage | Hire purchase (CHP) |
|---|---|---|
| Ownership during the loan | You own it from day one | Lender owns it during the term |
| Ownership at end of loan | You already own it — security is released | Ownership transfers to you after final/residual payment |
| Typical rates | 5.5%–10% p.a. for established businesses | 6%–10% p.a. for established businesses |
| GST treatment (if GST-registered) | Claim full GST upfront on purchase price in your next BAS | More complex — GST is generally deemed payable on the full supply at delivery, but treatment varies |
| Depreciation | You claim depreciation (you own the asset) | You generally claim depreciation (ATO treats CHP similarly for income tax purposes) |
| Instant asset write-off ($20K until 30 June 2026) | Eligible — you own the asset | Generally eligible — ATO treats CHP as an acquisition for tax purposes |
| Interest deductibility | Interest component is tax-deductible | Interest component is tax-deductible |
| Balloon / residual payment | Optional — you can choose to include one or not | Usually included — residual is typically part of the CHP structure |
| On your balance sheet | Yes — asset and liability from day one | Yes — under AASB 16, most CHP now appears on-balance-sheet |
| PPSR registration | Lender registers security interest | Lender registers as owner / secured party |
| Best for | Most businesses buying to keep. Simplest GST treatment. Broadest lender availability. | Businesses preferring structured residuals or specific accounting treatment. |
Rates current as of June 2026. Individual circumstances vary. Subject to lender criteria and approval. Tax treatment is general — consult your accountant.
Tax is the main reason business owners choose one structure over the other.
Chattel mortgage: If you're GST-registered, you can typically claim back the GST on the full purchase price in your next BAS — even though you're paying the loan off over several years. On a $100,000 piece of equipment (GST-inclusive), that's approximately $9,090 back in your hands within weeks of purchase. This is a significant cash flow advantage.
Hire purchase: The GST treatment is more complex. The ATO's position (outlined in GSTR 2000/35) treats hire purchase as a supply of goods rather than a progressive supply, which means the GST is technically payable on the full value at the point of delivery. In practice, many businesses claim the GST upfront on hire purchase as well — but the structure is less clear-cut than a chattel mortgage, and your accountant should confirm the correct treatment.
If you're not GST-registered: Neither structure gives you a GST credit. The GST simply becomes part of the total cost of the equipment.
Both structures generally allow depreciation claims. The ATO treats hire purchase similarly to chattel mortgage for income tax purposes — in both cases, the business is considered to have acquired the asset and can claim depreciation accordingly.
The $20,000 instant asset write-off (extended until 30 June 2026 for small businesses with aggregated turnover under $10 million) is generally available under both structures. Because both result in business ownership of the asset, the ATO treats both as eligible — unlike a finance lease, where the lender retains ownership and the write-off does not apply.
For a $19,500 piece of equipment purchased under either structure, a business on the 25% small business tax rate saves approximately $4,875 in tax in that financial year.
Both structures allow the interest component of your repayments to be claimed as a tax-deductible business expense. No material difference here.
For most situations, chattel mortgage offers the cleaner, simpler tax treatment — particularly for GST. This is why it's the default structure for the majority of business equipment finance in Australia. Hire purchase can achieve similar tax outcomes, but the path is less straightforward and more dependent on how the specific agreement is structured.
Consult your accountant before deciding. The right structure depends on your business type (sole trader, company, trust), your GST registration status, and how you use the equipment. A broker can recommend the finance structure, but the tax advice should come from your accountant.
Chattel mortgage is the right choice in most situations.
Hire purchase suits specific situations:
Finance lease / operating lease: The lender purchases the equipment and leases it to you. You make regular payments for use of the equipment, but the lender retains ownership throughout. At the end of the term, you may have options to purchase at residual value, extend the lease, or return the equipment.
The key tax difference: the instant asset write-off generally does not apply to leases, because the lender — not your business — owns the asset. The lender claims the depreciation, not you. GST is claimed progressively on each lease payment, not upfront.
Leasing suits businesses that want to use equipment for a defined period and then upgrade. For most businesses buying trucks, earthmoving equipment, or machinery to keep, chattel mortgage or hire purchase will be more tax-effective. Read the full equipment finance guide for all structures explained.
A novated lease is a different product entirely — it's a three-way arrangement between an employee, an employer, and a finance provider, designed for salary packaging a vehicle. It's only available to PAYG employees whose employer offers salary packaging.
If you're self-employed, a sole trader, or a business owner, a novated lease is not available to you. Your options are chattel mortgage, hire purchase, or lease. Read about car finance options for self-employed Australians.
If you are a PAYG employee considering a novated lease vs chattel mortgage, the comparison depends entirely on your employer's salary packaging arrangements and your personal tax position. Talk to your accountant.
Ownership timing. With a chattel mortgage, you own the asset from day one and the lender holds a security interest. With hire purchase, the lender owns the asset during the term and ownership transfers to you at the end after the residual payment. Both allow you to use the equipment immediately.
Rates are similar for both structures — typically within 0.5% of each other for equivalent business profiles. The real cost difference usually comes from the tax treatment (GST claiming, depreciation method) rather than the interest rate. This is why your accountant's advice matters more than the headline rate.
Generally yes. Both chattel mortgage and hire purchase result in business ownership of the asset (immediately or at term end), making both eligible for the $20,000 instant asset write-off (until 30 June 2026, for small businesses with turnover under $10 million). Finance leases are generally not eligible because the lender retains ownership. Confirm with your accountant.
Yes. Both chattel mortgage and hire purchase are commercial finance products available to businesses with an ABN. They're structured as business loans, meaning they generally sit outside consumer lending regulations (NCCP) — provided the asset is used predominantly for business purposes. If the vehicle or equipment is primarily for personal use, different rules and protections apply.
Yes. Both can be used for business vehicles (cars, utes, vans, trucks). If you're an ABN holder buying a vehicle that's used predominantly for business, either structure works. If the vehicle is primarily personal, a consumer car loan may be more appropriate and offers consumer protections under the NCCP. Read about car loan options.
With a chattel mortgage, you can sell the asset at any time (subject to paying out the loan). With hire purchase, you technically can't sell until ownership has transferred — which usually happens at the end of the term. In practice, early payout and sale is possible with both structures, but chattel mortgage gives you more flexibility. Note that early payout may incur fees — check your loan contract.
Yes. Chattel mortgage offers optional balloon payments. Hire purchase typically includes a residual payment as a standard feature. In both cases, the balloon or residual reduces your monthly repayments during the loan term but creates a lump sum obligation at the end. The amount can be refinanced, paid in cash, or covered by trading in the asset.
The right choice depends on your business structure, your tax position, and the equipment you're buying. A broker can recommend the finance structure — and your accountant can confirm the tax implications. No cost, no obligation.
This article provides general information only and does not constitute financial or tax advice. Tax treatment described is general in nature and depends on your individual circumstances, business structure, and GST registration status. Consult your accountant for tax advice specific to your situation. All finance applications are subject to lender criteria and approval. Rates mentioned are indicative and current as of June 2026 — individual circumstances vary. Novara Finance Pty Ltd | AFSL 517192 | ABN 99 687 789 144.