Equipment Finance Tax Benefits

Instant Asset Write-Off 2025-26

The instant asset write-off is one of the most powerful tax incentives available to Australian businesses purchasing equipment. For the 2025-26 financial year, eligible businesses can immediately deduct the full cost of individual depreciating assets costing up to $20,000 (GST exclusive) in the year the asset is first used or installed ready for use.

To qualify, your business must have an aggregated annual turnover of less than $10 million, and the asset must be used predominantly (more than 50%) for business purposes. The $20,000 threshold applies per asset, meaning you can purchase multiple qualifying items and claim the write-off on each one.

For assets costing more than $20,000, small businesses can still benefit from the simplified depreciation rules. These assets are placed in the general small business pool and depreciated at 15% in the first year and 30% in each subsequent year using the diminishing value method. This accelerated depreciation still provides meaningful tax benefits, just spread over a longer period.

Tax Benefits by Finance Structure

The tax benefits you can claim depend significantly on which finance structure you choose. Here is a comparison of the main options:

Chattel Mortgage: Because you own the equipment from day one, you can claim the full GST input credit upfront on your next BAS return. You can also claim depreciation over the effective life of the asset (or use instant asset write-off if eligible) and deduct the interest portion of your repayments. This structure typically provides the largest upfront tax benefit.

Hire Purchase: GST is claimed progressively on each instalment. Once ownership transfers at the end of the term, you can begin claiming depreciation. Interest is deductible throughout the hire period. This suits businesses that prefer a gradual approach to claiming GST.

Operating Lease: The entire lease payment is 100% tax deductible as an operating expense. No separate depreciation or interest calculations are needed — the full payment reduces your taxable income. GST is claimed on each lease payment. This is the simplest structure from a tax perspective.

Finance Lease: Lease payments are tax deductible, similar to an operating lease. The GST component of each payment is claimable on your BAS. The asset appears on your balance sheet and is depreciated for accounting purposes, though the lease deduction covers the tax benefit.

GST Credits on Equipment Finance

For GST-registered businesses, claiming GST input credits on equipment purchases is a significant benefit. The timing and method of claiming differs by finance structure, which can affect your cash flow planning:

• Chattel mortgage: Claim the full GST amount (e.g., $10,000 on a $110,000 purchase) on your next BAS return after purchase. Provides the largest single-quarter cash flow boost.
• Hire purchase: Claim the GST component of each instalment on each quarterly BAS return. Spreads the GST recovery evenly over the agreement term.
• Operating lease: Claim GST on each lease payment on your quarterly BAS. Aligns GST recovery with your payment schedule.
• Finance lease: Claim GST on each lease payment on your quarterly BAS, similar to operating lease.

End-of-Financial-Year Planning Tips

Strategic timing of equipment purchases can maximise your tax benefits. Here are practical tips for end-of-financial-year planning:

To claim deductions in the current financial year, the equipment must be installed and ready for use (not just purchased or ordered) before 30 June. Allow sufficient lead time for delivery, installation, and commissioning.

If you are considering a large equipment purchase, splitting it into individual assets under the $20,000 threshold (if possible) allows each to qualify for the instant asset write-off rather than being depreciated.

Pre-approving your equipment finance well before 30 June ensures there are no delays in the purchase settlement that could push your deduction into the next financial year. Our brokers can arrange pre-approval within days, leaving you ready to move quickly when you find the right equipment.

Note: This information is general in nature and should not be relied upon as specific tax advice. We strongly recommend consulting with a qualified accountant or tax advisor who can assess your individual circumstances and provide tailored guidance.