Vehicle and equipment finance for franchisees: leases, chattel mortgages and tax

• Chattel mortgage: you take title when you buy, and the lender holds security over the asset (ATO).
• Hire purchase: title stays with the financier until you pay the final instalment or exercise the purchase option (ATO).
• Lease: the leasing company owns the asset, and you can claim a GST credit on each lease payment if you're registered for GST (ATO).
• Instant asset write-off: $20,000 per asset, made permanent from 1 July 2026 for small businesses with aggregated turnover under $10 million (ATO).
• Car limit for 2026–27: $69,883. It caps the depreciable cost of most cars, and the GST credit on buying one at $6,353.
• Check what your franchisor specifies before you arrange finance, including approved suppliers.

• Chattel mortgage: a loan to buy the asset, with the lender holding security over it. You own it from day one, so depreciation and loan interest are the deductions to discuss with your accountant.
• Hire purchase: you use the asset while paying for it in instalments, and you don't own it until the final instalment is paid (ATO). A larger final payment can lower the instalments.
• Lease: the leasing company owns the asset and you pay to use it for an agreed period. business.gov.au warns you may have to keep paying for the full lease even if you stop using the asset.
• Car or equipment loan: you buy the asset outright with borrowed money. business.gov.au notes that a car is generally used to secure a car loan.
• Dealer finance: a loan most car dealerships offer on new cars. business.gov.au warns it may include rates and fees that add to the cost, and a balloon payment at the end.
• Rental or rent-to-own from a franchisor or nominated supplier: read the terms as closely as any lease, including who repairs the equipment and what happens if the franchise ends early.

These ATO rules apply if your business is registered for GST and uses the asset in the business. You need a tax invoice to claim a credit.

• Buying outright or with a chattel mortgage: you can generally claim the GST in the price as a credit. With a chattel mortgage, the ATO says the whole credit is available in one period: when you pay in full with the borrowed funds (cash basis), or when you receive the invoice or pay, whichever is earlier (non-cash basis).
• Hire purchase entered into from 1 July 2012: you can claim the full GST credit up front, including GST on the credit charge, whether you account for GST on a cash or non-cash basis.
• Lease: you claim one-eleventh of each lease payment as a credit, generally in the period you pay it or are invoiced for it. For cars, the lease credit isn't limited by the car limit.
• Partly private use: claim only the business-use share of the credit.
• Cars over the car limit: the most GST credit you can generally claim for 2026–27 is $6,353, one-eleventh of $69,883.
• Exceptions to that cap include commercial vehicles not designed mainly to carry passengers.
• Luxury car tax: you can't claim a credit for any luxury car tax you pay.

• From 1 July 2026, the $20,000 instant asset write-off is permanent law for small businesses with aggregated turnover under $10 million, according to the ATO (updated 27 August 2026).
• It applies per asset, to new and second-hand assets, in the income year the asset is first used or installed ready for use.
• The asset's whole cost must be less than $20,000, even if you only claim the business-use share. If you can claim a full GST credit, the cost excludes the GST.
• Assets costing $20,000 or more go into the small business pool, depreciating at 15% in the first year and 30% a year after that. Pool balances under $20,000 at the end of an income year can be written off.
• Illustrative: a $15,000 (GST-exclusive) machine used only for business and first used in 2026–27 can be deducted in full that year. A $25,000 machine instead gives a first-year pool deduction of $3,750.
• Cars: the car limit caps the cost you can use to work out depreciation at $69,883 for cars first used or leased in 2026–27.
• Leases: business.gov.au notes you may be able to claim leasing costs as a tax deduction if you use the equipment solely for business, while a purchase gives you the equipment or its depreciation to claim.

Illustrative only: standard amortisation formula, monthly repayments, an assumed rate of 8.5% a year and no fees.

• $60,000 van over 5 years with no balloon: about $1,231 a month, with total interest of about $13,860.
• $60,000 van over 5 years with an $18,000 (30%) balloon: about $989 a month, then $18,000 at the end, with total interest of about $17,352.
• $60,000 van over 4 years with no balloon: about $1,479 a month.
• $40,000 of equipment over 5 years: about $821 a month, with total interest of about $9,240.

The balloon lowers the monthly payment by about $242, but you pay about $3,492 more in interest and must find $18,000 at the end. Plan for that lump sum from day one.

Many franchise systems control what you buy and where you buy it, which affects your finance. In FranchiseScope's analysis of Franchise Disclosure Register profiles (captured 19 August 2026, self-reported by franchisors), supplier restrictions were disclosed by 56% of home and trade services franchisors (n=109), 58.3% in lawn and garden (n=12) and 43.9% in cleaning (n=66).

• Ask whether you must buy from a nominated supplier, and whether the franchisor or an associate receives supplier rebates. The disclosure document must describe rebates.
• Ask whether the agreement restricts who can finance the asset, and get an independent quote to compare with any finance the franchisor or its supplier offers.
• Match the finance term to the asset's working life and to the franchise term, so you're not paying for a van after the agreement ends.
• Check the upgrade rules. A required vehicle or equipment upgrade can be significant capital expenditure, which the franchisor can require only in limited cases, such as when it was disclosed before you signed.
• For agreements entered into, renewed, extended or transferred from 1 November 2025, the Code requires compensation terms if the franchisor ends the agreement early because it leaves Australia, shrinks its network or changes how it distributes, including for specialist or branded equipment that can't be reused.
• Branded vehicles and specialised equipment may be worth less on resale if you leave the system, so don't assume the asset will cover a large balloon.

business.gov.au compares leasing and buying in detail. These are the trade-offs that matter most for franchisees.

• Leasing generally costs less upfront, but repayments, fees and charges can end up costing as much as a car loan.
• Leasing makes it easy to upgrade every 2 or 3 years; buying means selling the old vehicle first.
• You're not allowed to modify a leased vehicle, which matters if your franchise needs racking or a custom fit-out.
• A leased vehicle isn't your asset for borrowing purposes. A bought one is, even if it's financed.
• You may have to keep paying a lease for its full term even if you no longer need the asset.
• If you use a vehicle to secure a loan and miss repayments, it can be repossessed.
• business.gov.au suggests asking your registered tax professional or financial adviser if you're unsure which suits you.

• I've confirmed what the franchisor requires, and whether suppliers or financiers are restricted.
• I have quotes for at least two finance options, with the total cost including fees and any balloon.
• No finance term outlasts the asset's working life or my franchise agreement.
• I know whether I'm registered for GST and when I can claim each credit.
• My accountant has confirmed whether the instant asset write-off or the small business pool applies.
• I'll keep records of business and private use for any vehicle.
• I've checked insurance, including whether the financier requires comprehensive cover and whether GAP insurance is worth having.