Overview
In Australia, GST on equipment finance depends on the product you choose (chattel mortgage/equipment loan, hire purchase, finance lease or operating lease). The big differences are:
- Whether GST is claimed up front or over time
- Whether repayments include GST
- How deposits, trade-ins and balloons/residuals are treated
Your GST position should be considered alongside ownership goals, cash flow, and tax planning—not in isolation.
At a glance: key points
- Chattel mortgage (equipment loan): claim GST on the asset price up front if eligible; no GST on repayments or interest.
- Hire purchase: for agreements on/after 1 July 2012, claim full GST up front if eligible; repayments generally exclude GST on the finance charge.
- Finance/operating lease: no GST up front; GST is on each rental and on the residual/termination amount.
- Private/mixed use requires apportionment; cars are subject to ATO car GST credit limits.
- You need a valid tax invoice and GST registration to claim input tax credits.
How equipment finance works · Tax benefits · GST and tax guide
GST treatment by product
Chattel mortgage (equipment loan)
- GST applies to the supplier’s sale price of the asset.
- Eligible GST-registered businesses can generally claim the full GST up front from the tax invoice (apportion for private use; car limits apply).
- Loan repayments and interest are input taxed—no GST on repayments or interest.
- Balloon at the end: no GST (the GST was handled at purchase).
Learn more: Chattel Mortgage GST · Balloon payments
Hire purchase
- For HP agreements entered into on or after 1 July 2012, the purchaser can generally claim the full GST on the asset price up front if a tax invoice is held.
- Repayments typically exclude GST on the finance charge; apportion for private use.
- Earlier (pre-1 July 2012) rules differ—credits were often claimed over time on cash basis.
Learn more: Hire Purchase GST
Finance lease
- The financier buys the asset and leases it to you.
- No up-front GST claim on the asset price by the lessee.
- GST applies to each lease rental and to the residual/termination amount; you claim credits per payment.
- End-of-term options can change GST outcomes—check your agreement.
Learn more: Finance Lease GST
Operating lease
- Like finance lease for GST timing: GST is on each rental; you claim credits per payment.
- No ownership; end-of-term return or renewal—GST continues to apply to rentals.
Learn more: Operating Lease GST
Worked examples
Example 1: Chattel mortgage
Asset price $110,000 incl. GST (GST component $10,000).
- Up-front GST claim: $10,000 (subject to creditable use and any car limit).
- Repayments: no GST on principal/interest.
- Balloon: no GST.
Example 2: Finance lease
Same asset financed under a finance lease.
- No up-front GST claim on the asset price.
- Each rental includes 10% GST—claimable per payment.
- Residual/termination includes GST—claimable when paid.
Example 3: Hire purchase (post 1 July 2012)
Asset price $55,000 incl. GST (GST $5,000).
- Up-front GST claim: $5,000 (if you hold a tax invoice and use for a creditable purpose).
- Repayments: finance charges typically input taxed—no GST to claim on interest.
These are general examples only. Always confirm your BAS treatment with your tax adviser.
Documentation and eligibility
- GST registration and valid ABN
- Valid tax invoice from a GST-registered supplier (unless purchasing from a private seller—no GST to claim)
- Creditable purpose (generally >50% business use) with private use apportioned
- For cars: input tax credits are capped by the ATO car limit for the year
- Keep settlement statements and finance agreements for your records
Related topics: Requirements · Approval time · Rates
BAS reporting basics
- Loans/HP (post-2012): claim the input tax credit for the GST on the tax invoice in the BAS period of settlement/invoice (apportioned as needed).
- Leases: claim input tax credits on each rental in the period you are invoiced (accruals) or pay (cash basis).
- Deposits, trade-ins and residuals/balloons follow the product rules above.
BAS labels and methods can vary—confirm the correct reporting with your accountant or bookkeeper.
Common pitfalls to avoid
- Assuming repayments on a loan include GST—loan repayments/interest are generally input taxed.
- Claiming full GST when buying from a private seller—no GST in the price means no credit.
- Ignoring car GST credit limits—credits may be capped even for business use.
- Not apportioning for private use—can trigger adjustments and penalties.
- For leases, forgetting GST on the residual—budget for it at end of term.
Get help with GST on equipment finance
Have a tricky scenario, private use, trade-in or import? Send us the invoice/quote and we’ll outline the likely GST treatment by product and next steps.
General information only. Not tax advice. Confirm your position with your accountant and the ATO.
Frequently asked questions
How does GST work for a chattel mortgage (equipment loan)?
GST applies to the supplier’s asset price, not to the loan or interest. If you are GST-registered and the asset is used for a creditable purpose, you can generally claim the full GST up front in the BAS period of settlement/tax invoice (apportion for private use; car GST caps may apply).
How does GST work for a finance lease or operating lease?
No up-front GST claim on the asset price. Each lease rental includes 10% GST and you claim input tax credits on each payment. Residual/termination amounts usually include GST as well.
What about hire purchase?
For HP agreements entered into on or after 1 July 2012, eligible purchasers can generally claim the full GST up front if they hold a tax invoice (apportion for private use). Finance charges are typically input taxed.
Can I claim GST on interest, account-keeping fees or stamp duty?
Interest and most loan administration charges are input taxed—no GST to claim. Some lender fees may include GST—check your documents. Government charges like stamp duty do not include GST.
How are deposits, trade-ins and balloons/residuals treated?
Deposits usually include GST that can be claimed if the purchase is creditable. Trade-ins to a GST-registered dealer are taxable supplies and may require you to remit GST on the trade-in value. For leases, residuals include GST; for loans/chattel mortgages, balloons do not include GST because GST was handled at purchase.
What if I buy from a private seller?
If there is no GST in the price (e.g., private seller), there is no input tax credit to claim, regardless of how the purchase is financed.
How does private use affect my claim?
Claim only the business-use percentage. Keep a reasonable basis (e.g., logbook) and adjust if usage changes.
Do GST and instant asset write-off work the same way?
No. GST credits are about GST on the purchase price and BAS timing. Instant asset write-off/temporary full expensing are income tax rules. They interact, but they are separate concepts—get advice before settling.
Is GST different for vehicle and machinery finance?
The product rules are the same, but vehicles can be subject to car GST credit limits. See Vehicle Finance GST and Machinery Finance GST.
Final takeaway
The right equipment finance structure can improve cash flow simply by changing how and when you claim GST. Compare GST timing, ownership outcomes, and end-of-term costs before you commit.
Explore more: Equipment Finance · Pros and cons · Loan terms · Deposits