The Complete Guide to Equipment Finance & Tax Benefits in Australia

The instant asset write-off allows eligible businesses to immediately deduct the full cost of assets costing less than $20,000 each in the income year the asset is first used or installed ready for use. The threshold has been extended to 30 June 2026 for businesses with aggregated annual turnover under $10 million that use the simplified depreciation rules. This is a per-asset threshold, not a total cap, meaning you can write off multiple assets in the same financial year provided each individual asset costs less than $20,000 before GST for GST-registered businesses, or less than $20,000 including GST for non-GST-registered businesses.

To claim the instant asset write-off, your business must have aggregated annual turnover under $10 million and be using the simplified depreciation rules. The asset must be first used or installed ready for use between 1 July 2024 and 30 June 2026 for the current extension period. Both new and used assets qualify, meaning second-hand equipment purchases attract the same write-off as brand new items. The asset must be used for a taxable purpose, and if it is used partly for private purposes, you can only claim the business-use percentage. Sole traders, partnerships, companies, and trusts can all access the write-off provided the turnover and depreciation rule requirements are met.

Assets costing $20,000 or more do not qualify for the instant write-off but can still be depreciated through the small business depreciation pool. Assets placed in the pool are depreciated at 15% in the first year and 30% in each subsequent year using the diminishing value method. This means a $50,000 piece of equipment would generate a $7,500 deduction in year one, $12,750 in year two, and progressively declining amounts thereafter. The pool balance itself can be written off immediately if it falls below $20,000 at the end of an income year, providing an additional planning opportunity.

The finance structure you choose determines when and how you claim tax deductions. Under a chattel mortgage, you own the asset from day one, which means you can claim the instant asset write-off in the year the asset is first used, claim GST credits upfront on the full purchase price, and deduct interest on the finance as a business expense. Under a finance lease, the lessor owns the asset, so you cannot claim the instant write-off or upfront GST credits, but you can deduct lease payments as an operating expense. Under hire purchase, ownership transfers on the final payment, and tax treatment depends on whether you have elected to treat it as a notional sale for GST purposes.

For most GST-registered businesses seeking to maximise tax deductions, a chattel mortgage is the preferred structure. It provides immediate ownership, enabling the instant asset write-off claim in the same financial year. You claim the full GST credit on the purchase price in your next BAS, improving cash flow by up to 10% of the asset cost. Interest is tax-deductible, and you retain flexibility to sell or trade the asset at any time since you hold title. Approximately 65% of business vehicle finance in Australia is structured as chattel mortgages for these reasons. The main scenario where a finance lease may be preferable is for businesses not registered for GST or those wanting off-balance-sheet treatment.

Australian businesses invested $23.59 billion in equipment during Q3 2025, a 9.9% increase year-on-year, with the strongest growth categories being forklifts at 49% and trailers at 37%. Truck finance for prime borrowers currently starts from approximately 6.5% p.a. with terms of 3 to 7 years. General equipment finance ranges from 6.5% to 11% p.a. depending on asset type, borrower profile, and structure. Medical and dental equipment, construction machinery, manufacturing plant, and agricultural machinery are all commonly financed. With the RBA cash rate at 3.85% as of February 2026, equipment finance rates have eased slightly from their 2024 peaks, though individual pricing depends heavily on business strength and asset quality.

Strategic timing can significantly enhance tax benefits. To claim the instant asset write-off in the current financial year, the asset must be first used or installed ready for use before 30 June 2026. This means the asset must be delivered, set up, and operational, not merely ordered or paid for. Businesses purchasing equipment in April or May should allow sufficient lead time for delivery and installation, particularly for imported or custom-built machinery. Conversely, if your business has already utilised significant deductions in the current year and expects higher income next year, deferring the purchase to July could provide a larger tax benefit. Discuss timing strategies with your accountant to align equipment purchases with your overall tax position.

Both new and used equipment qualify for the instant asset write-off and for equipment finance. New equipment typically attracts lower finance rates because lenders view it as lower risk with longer useful life and manufacturer warranty protection. Used equipment is often more affordable upfront and can offer better value when the asset has significant remaining service life. Lenders generally finance used equipment up to 10 to 15 years old depending on the asset category, with slightly higher rates reflecting the shorter remaining useful life. From a tax perspective, the deduction is based on the purchase price regardless of whether the asset is new or used, so a $19,000 used excavator attracts the same instant write-off as a $19,000 new one.

Andorra Private works with over 40 equipment finance lenders, allowing us to match your business profile and asset type with the most competitive rates and structures. We coordinate with your accountant to ensure the finance structure maximises your tax position, whether that is a chattel mortgage for instant asset write-off claims, a finance lease for off-balance-sheet treatment, or a hire purchase arrangement. Our team understands the EOFY deadline pressures and works to pre-approve finance so you can move quickly when the right asset becomes available. From a single $15,000 tool purchase to a multi-million dollar fleet acquisition, we structure each facility to deliver the best combination of cash flow management and tax efficiency.