Overview
For most Australian salons, clinics and beauty businesses registered for GST, the way GST is treated depends on the finance product you choose:
- Chattel mortgage: claim the full GST on the purchase price upfront (subject to business-use) when you receive the supplier’s tax invoice. Repayments are generally GST-free. Interest is GST-free; some fees may include GST.
- Hire purchase: in most cases you can also claim the full GST upfront if you hold a valid tax invoice. Interest is GST-free; some fees may include GST.
- Finance/operating lease: GST applies to each lease rental; you claim 1/11th of each payment on your BAS. Residuals usually include GST.
Choosing the right structure can change BAS timing, cash flow and the size of any GST credit you receive.
How GST works on financed beauty equipment
The ATO lets GST‑registered businesses claim input tax credits to the extent an asset is used to make taxable supplies. Most beauty and cosmetic services are taxable (not GST‑free), so salons and clinics can usually claim GST on eligible equipment such as lasers/IPL, HIFU, LED devices, microdermabrasion machines, autoclaves, treatment beds, salon chairs and POS systems.
The key differences are timing and source of the GST:
- Upfront claim (chattel mortgage or hire purchase): you receive a supplier tax invoice showing GST on the asset price. You can generally claim this full GST in your next BAS period (apportioned for any private or GST‑free use).
- Ongoing claim (leases): you claim 1/11th of each rental as paid. Upfront rentals and most fees on the lease also include GST you can claim. The residual typically has GST when paid.
GST by finance type
Chattel Mortgage (Equipment Loan)
- Supplier issues tax invoice for the full purchase price including GST.
- Claim full GST upfront on your BAS (business-use portion only).
- Repayments: no GST on principal or interest; some lender/broker fees may have GST.
- Balloon/payout: generally no GST on the principal component.
- On sale or trade-in: you may need to charge GST if registered and making a taxable supply.
Hire Purchase
- GST is generally calculated on the full taxable value at commencement.
- With a valid tax invoice, most businesses can claim the full input tax credit upfront (apportioned for business use).
- Interest is GST-free; some establishment or documentation fees may include GST.
Finance Lease
- GST applies to each lease rental payment; claim 1/11th of each rental when paid.
- Upfront rentals and most lease fees include GST; residuals usually include GST.
- Ownership generally remains with the lessor during the term.
Operating Lease
- Similar to a finance lease for GST: GST on rentals, claim 1/11th as you pay.
- Often includes maintenance/servicing in the rental, which also carries GST.
See Equipment Finance GST Treatment or compare structures in Equipment Loan vs Lease and Buy vs Lease Equipment.
Worked example (cash flow impact)
Scenario: Laser device priced at $66,000 incl. GST (i.e., $60,000 + $6,000 GST).
- Chattel mortgage or hire purchase: you receive a supplier tax invoice for $6,000 GST and can generally claim that full $6,000 on your next BAS (subject to eligible business use). Repayments do not include GST.
- Lease: you do not claim $6,000 upfront. Instead, each rental includes GST. For example, if rentals are $1,320 per month incl. GST, you claim $120 per month (1/11th), plus any eligible GST on fees.
This timing difference can materially change early cash flow. Some clinics prefer the upfront BAS credit; others prefer the operational simplicity of claiming on each rental.
Eligibility and documentation
To claim input tax credits you generally need to:
- Be registered for GST and use the equipment to make taxable supplies.
- Hold a valid tax invoice (or lease invoice for rentals) in the correct entity name/ABN.
- Apportion for any private or GST‑free use and keep records supporting the percentage claimed.
Typical lender documents for beauty equipment finance include supplier quotes/invoices, equipment details (make/model/serial), business trading history, bank statements, and identity information. Clear documentation helps reduce approval friction and ensures the GST claim lines up with the finance structure.
Special cases and common pitfalls
Imported machines and Deferred GST
- Import GST is usually payable at the border unless you’re in the ATO’s Deferred GST Scheme (DGST), which shifts the GST to your BAS.
- Ensure the importer of record, finance agreement, and invoices align to avoid mismatched documentation.
Trade-ins and upgrades
- Trading in old devices is generally a taxable supply if you’re registered, so GST may apply to the trade-in value.
- Ensure the supplier paperwork shows the correct net amounts and GST for both the new purchase and trade-in.
Mixed use (personal or GST‑free services)
- If equipment is partly for private use or GST‑free activities, only claim the business-use/taxable-use portion of GST.
- Keep usage notes or rosters to support your apportionment method.
Fees and insurance
- Interest is input taxed (no GST). Many establishment, documentation, and broker fees include GST; check invoices.
- Equipment insurance usually attracts GST and other charges; keep policy schedules for BAS support.
For deeper reading, see: Chattel Mortgage GST Treatment, Hire Purchase GST Treatment, Finance Lease GST Treatment, and Operating Lease GST Treatment.
Get help with GST on beauty equipment finance
Have a quote or invoice and want to confirm what GST you can claim and when? Send the details and our Australian team will outline the GST treatment for your structure and suggest options to improve cash flow.
Frequently asked questions
How does GST work on a chattel mortgage for beauty equipment?
You typically claim the full GST from the supplier’s tax invoice on your next BAS (apportioned for business use). Repayments are GST-free; interest is GST-free, and some fees may include GST.
What about GST on a finance or operating lease?
GST is charged on each rental. You claim 1/11th of each payment (and any eligible fees) as you pay them. Residuals usually include GST too.
Can I claim GST upfront under hire purchase?
In most standard commercial hire purchase agreements you can claim the full GST upfront with a valid tax invoice, subject to eligible business use.
Do repayments include GST?
Chattel mortgage and hire purchase repayments are generally GST-free (excluding some fees). Lease rentals include GST.
What if the equipment is used partly for non-business or GST‑free work?
Apportion your claim to the business/taxable-use percentage and keep records to support it.
Is there GST on balloons or residuals?
Chattel mortgage balloons are typically principal only (no GST). Lease residuals usually include GST.
How is import GST handled on overseas purchases?
Import GST is payable at the border unless you use the ATO’s Deferred GST Scheme. Ensure import and finance paperwork align.
Where can I read more about tax benefits beyond GST?
See our guides on Beauty Equipment Finance Tax Benefits and the Asset Finance Tax Benefits Guide. Always verify the latest ATO rules with your tax adviser.
Final takeaway
The GST outcome for beauty equipment finance in Australia mainly comes down to product choice and business-use percentage. Chattel mortgage and hire purchase often give a larger upfront BAS credit, while leases spread claims across rentals. Align the finance structure with your cash flow goals and record‑keeping.
If you’re unsure, share your quote and we’ll map the GST treatment for each option and highlight the practical differences for your salon or clinic.