Asset finance and tax in Australia: write-offs, GST and depreciation

The tax treatment of a financed asset can be worth as much as the rate you pay on it. Get the structure right and you bring deductions and GST credits forward, keep more cash in the business, and avoid surprises at year end.

This guide explains how financed assets are treated for tax in Australia: the instant asset write-off, GST timing, depreciation, and how balloons fit in. It is general information written from the broker's chair. Tax rules and thresholds change often, so confirm everything with your accountant or registered tax agent before you lodge.

The instant asset write-off

The instant asset write-off lets an eligible small business claim an immediate deduction for the cost of an asset in the year it is first used or installed ready for use, rather than depreciating it over years. It applies per asset, so you can write off more than one asset in the same year.

For the 2024 to 25 and 2025 to 26 income years the threshold is $20,000 (excluding GST) per asset, for small businesses with aggregated turnover under $10 million. The key point for finance: eligibility is based on the asset's cost and business use, not on how you pay. Financing the asset does not disqualify you, so you can keep your cash working and still claim the deduction. The threshold has moved several times and is legislated only to set dates, so always check the figure for your income year. We go deeper in our guide to the instant asset write-off on financed equipment.

GST timing by structure

When you claim the GST depends on the structure:

• Chattel mortgage and commercial hire purchase: a GST-registered business can usually claim the GST credit on the purchase price upfront, in the BAS for the relevant period.
• Finance lease, operating lease and rental: GST is charged on each payment and claimed as you pay it, rather than upfront.

For passenger vehicles there is a car cost limit that caps both depreciation and the GST credit you can claim, regardless of the price you pay. Your accountant can confirm the current limit and how it applies to your vehicle.

Depreciation and interest

How you claim the cost over time also follows the structure:

• Chattel mortgage and hire purchase: you own the asset, so you claim depreciation on it plus the interest portion of your repayments, to the extent of business use.
• Lease and rental: you do not own the asset, so instead of depreciation you claim the rental or lease payments, again to the extent the asset earns income.

Assets above the write-off threshold are depreciated over their effective life, or through the small business pool for eligible businesses. Your accountant will choose the method that suits you.

How balloons and residuals affect tax

A balloon on a chattel mortgage, or a residual on a lease, is a lump sum parked until the end of the term. It lowers your periodic payments but does not change the basic treatment: on a chattel mortgage you keep claiming depreciation and interest, and on a lease the residual must meet the ATO minimums so the arrangement stands as a genuine lease. Set a balloon you have a clear plan to pay, refinance, or cover by selling the asset. More in our balloon payments guide.

The honest caveats

Two things to keep front of mind. First, every figure here is time-sensitive: the write-off threshold, the car limit, and FBT rules all change, so use the current year's numbers. Second, this is general information, not advice for your situation. The structure that gives the best tax outcome depends on your accounting basis, turnover, and how the asset is used. Line up your broker and accountant on the same conversation before you sign, so the finance structure and the tax plan match.

Authoritative sources

• ATO: Instant asset write-off
• ATO: Changes to car thresholds
• ATO ID 2002/1004: Car lease residual values
• business.gov.au: Instant Asset Write-Off

This is general information only and not financial, credit, or tax advice. Tax thresholds and rules change, including the instant asset write-off which is legislated only to set dates. Consider your own circumstances and speak to your accountant or registered tax agent.

This article is general information only and not financial, credit, or tax advice. Ventas Asset Lending is a finance broker, not a lender. Approvals are subject to lender assessment. Consider your own circumstances and speak to a qualified professional, including your accountant for any tax questions.