EOFY conversations get noisier each year and the message gets more confused. Two things are independently true. The instant asset write-off threshold of $20,000 per asset for small business entities (aggregated turnover under $10 million) applies to assets first used or installed ready for use by 30 June 2026. And, for the first time in a few years, the cost of financing those assets has gone up enough that the financing decision is no longer a footnote.
The first thing to be clear on. The instant asset write-off does not save you tax in cash terms relative to depreciating the asset over time. It shifts the timing of the deduction forward. For a small business at the company tax rate of 25 per cent, claiming a $20,000 deduction in 2025-26 saves $5,000 of tax for that year, instead of spreading that $5,000 of saving over (say) five years of depreciation. The benefit is the time value of the early deduction. The size of that benefit depends on your discount rate and your taxable income profile.
Buy outright, chattel mortgage, or operating lease?
For an asset under $20,000, paying cash and writing off the full amount is the simplest treatment. The trade-off is the cash you take out of working capital. For a business already running on a tight cash-conversion cycle, that one decision can drive a string of consequential ones (deferred supplier payments, drawn line of credit, missed early-pay discounts) that cost more in aggregate than the financing they were trying to avoid.
A chattel mortgage finances the asset, leaves you as the legal and tax owner, lets you claim the GST upfront on the purchase price, and lets you claim the instant asset write-off (or depreciation, if over the threshold) at tax time. The financing rate sits broadly between 7.95 and 10.95 per cent for prime SME borrowers in May 2026, depending on asset class, age, and loan term. For most owner-operated businesses buying production-related equipment, this is the default best fit.
An operating lease keeps the asset off your balance sheet (with caveats post-AASB 16), gives you flexibility at end of term (return, extend, upgrade), and the rentals are deductible as you pay them. You do not own the asset and cannot claim the instant asset write-off. For technology that you will replace before useful life ends (most IT, some medical, some hospitality), the operating lease still wins on practicality. For long-life production equipment that you would rather own at end of term, the chattel mortgage usually wins.
What changed about the cash-flow trade-off in 2026
A year ago, financing rates of 6 to 7.5 per cent and term-deposit rates of 4 to 5 per cent meant the spread between paying cash and financing was small enough that the decision was almost a stylistic one. In May 2026, with financing in the 8 to 11 per cent band and risk-free returns broadly unchanged, the spread is meaningful. Paying cash for an asset that you would otherwise finance at 9.5 per cent is, in effect, getting a 9.5 per cent post-tax return on the cash you deploy. For a business with surplus working capital and no near-term cash-cycle stress, that return beats almost any other deployment.
Two heuristics that survive most cycles. If financing the asset would push your debt-service ratio above where you are comfortable, do not finance it. If paying cash for the asset would force you to draw on a working-capital line within 90 days, do not pay cash for it. Most situations sit somewhere between, and the decision is best made with a 3-month forward cash-flow forecast, not a feeling.
A practical EOFY checklist
- Confirm the asset will be installed ready for use by 30 June 2026 to qualify for the write-off in the current year. "Ordered" or "delivered" is not enough.
- Confirm aggregated turnover for your group is under $10 million. The threshold uses aggregated turnover, not entity-level turnover.
- Get the financing offer in writing with the comparison rate at your exact loan amount and term, not the published example rate.
- Check the early-repayment policy. Some asset-finance products attract break fees if you pay out before end of term; that matters if you might refinance later.
- For chattel mortgage, confirm the lender will register their security on the PPSR. The registration is what gives you the secured-rate pricing.
- Discuss the financing decision with your accountant before EOFY. The interaction between immediate write-off, GST claim, and any temporary loss carry-back rules is taxonomy-specific to your structure.
For more on each of the products mentioned here, our equipment finance hub walks through chattel mortgage, finance lease, hire purchase, and operating lease side by side, with the AASB 16 implications spelt out for each. The write-off rules sit on the ATO page; we link through.