New ute, excavator, trailer or a full fit-out of tools? Most tradies don’t pay cash for big equipment, and they shouldn’t have to. The real question is which type of finance suits your business. The three you’ll hear about most are a chattel mortgage, a lease and a hire purchase. They can look similar on a quote, but they differ in who owns the asset, how GST works and what you can claim at tax time.

Chattel mortgage: you own it from day one

A chattel mortgage is a loan to buy the equipment. You own it straight away, and the lender takes security over it until the loan is paid off. It’s the most common choice for tradies who are registered for GST.

• GST up front. If you’re registered for GST, you can generally claim the GST in the purchase price as a credit on your next BAS, rather than spreading it over the term.
• Tax deductions. You may be able to claim depreciation on the asset and the interest on the loan, in line with how much the asset is used for business.
• Flexible structure. Terms are often 1 to 5 years (sometimes longer for heavy machinery), with the option of a deposit, a balloon payment or neither.

Lease: you use it, the financier owns it

With a lease, the financier buys the equipment and you pay to use it for an agreed term. At the end, there’s usually a residual value you can pay to keep the asset, or you can hand it back, upgrade or refinance the residual, depending on the agreement.

• GST in each payment. GST is included in every lease payment, and you claim it as you go, rather than in one hit.
• Payments may be deductible. Lease payments for business use are generally claimed as an expense. You don’t claim depreciation, because you don’t own the asset.
• Good for gear you upgrade often. Leasing can suit equipment that dates quickly, like technology, or where you want to keep the asset off your own balance sheet.

Hire purchase: you own it at the end

Under a hire purchase, the financier buys the asset and hires it to you. Ownership passes to you when you make the final payment. It sits somewhere between a lease and a chattel mortgage, and it’s less common than it used to be.

• GST can be claimed up front. The ATO generally allows the full GST credit on a hire purchase to be claimed in the period you make your first payment.
• Tax treated much like owning it. For tax purposes, you’re usually treated as the owner, so depreciation and interest may be claimable. Your accountant can confirm.

The instant asset write-off

Small businesses with aggregated turnover under $10 million can immediately deduct eligible assets costing less than $20,000 each. According to the ATO, this threshold has been made permanent from 1 July 2026. It applies to assets you own, so it’s usually relevant to a chattel mortgage or hire purchase, not a lease. Assets of $20,000 or more can generally go into the small business depreciation pool instead. Check with your accountant before buying, as the timing and business-use percentage both matter.

Should you use a balloon payment?

A balloon (or residual) is a lump sum left owing at the end of the term. It lowers your regular repayments, which can help cash flow, but you pay more interest overall and you need a plan to pay it out, refinance it or sell the asset. Lenders usually cap balloons based on the asset’s age and the term, so a large balloon on older equipment may not be possible.

What lenders look at

• How long your ABN has been registered, and whether you’re registered for GST
• Your credit history, both personal and business
• The type, age and resale value of the equipment
• Whether you own property, which can open up low-doc options with some lenders
• For larger amounts, tax returns, BAS or bank statements to show you can afford the repayments

A typical scenario

Take a plumber who’s been trading for three years and needs a new ute and a drain camera. They’re registered for GST and want to keep monthly repayments manageable. A chattel mortgage over five years with a modest balloon could let them claim the GST on their next BAS and keep repayments in line with their cash flow. The drain camera, at under $20,000, might be bought separately so their accountant can look at the instant asset write-off.
This is an illustrative example only. Every situation, lender and outcome is different.

Frequently asked questions

Which is better for tradies, a chattel mortgage or a lease?

For GST-registered tradies who want to own their gear, a chattel mortgage is often the simplest fit. A lease can suit equipment you plan to upgrade regularly. The right answer depends on your cash flow and tax position.

Can I finance used equipment?

Yes. Many lenders finance used equipment, including private sales, though the asset’s age at the end of the term may limit the term or balloon available.

Do I need a deposit?

Not always. Some lenders offer full finance for established businesses with a good credit history. Newer businesses may be asked for a deposit or extra security.

I’ve only just got my ABN. Can I still get equipment finance?

It’s possible, but options are narrower. Some lenders will consider newer ABNs, especially if you own property or have worked in the same trade before. A larger deposit can also help.

Get the right structure from the start

Tell us what you’re buying and how your business runs. We’ll compare structures and lenders, and set up repayments that work with your cash flow, so you can talk it through with your accountant before you sign.

General information only. This article doesn’t consider your objectives, financial situation or needs, and isn’t tax or credit advice. Speak to your accountant about GST, depreciation and the instant asset write-off for your business. Equipment finance is arranged by Papara Pty Ltd t/a Stratium Finance (ABN 63 666 308 943), Corporate Credit Representative 571077 of COG Aggregation Pty Ltd, ACL 389527. All finance is subject to lender approval, terms, conditions, fees and charges.