Understanding when you can claim GST credits — upfront, on repayments, or not at all — depends entirely on your finance structure.
GST treatment is one of the most significant differences between asset finance structures. For GST-registered businesses, the ability to claim a GST credit upfront can free up thousands of dollars in cash flow in the first BAS period after purchase.
The key principle: if you buy the asset, you claim the GST on the purchase price. If you lease it, the lessor owns the asset and GST is embedded in the lease payments.
| Structure | GST Credit | When | On What |
|---|---|---|---|
| Chattel Mortgage | ✅ Upfront | First BAS after settlement | Full purchase price GST |
| Hire Purchase | ✅ Upfront | First BAS after settlement | Full purchase price GST |
| Finance Lease | ✅ On each payment | Each BAS period | GST component of each rental |
| Operating Lease | ✅ On each payment | Each BAS period | GST component of each rental |
| Novated Lease | Depends | Varies | Complex — depends on employer structure |
Under a chattel mortgage, you purchase and own the asset. The lender provides finance, but the transaction is a sale from the dealer to you. This means:
Purchase price: $110,000 (inc. GST)
GST credit claimed on next BAS: $10,000
Effective cost to your business: $100,000 + interest
Monthly repayments: No GST component
Under a finance lease, the lessor (lender) purchases and owns the asset. You make rental payments that include a GST component. This means:
Identical to finance lease in terms of GST treatment. Each rental payment includes GST, which you claim on each BAS. The difference is that at the end of an operating lease there's no obligation to purchase — you simply return the asset.
The GST difference between structures has a real cash flow impact, particularly for larger assets:
| Asset Price (inc. GST) | Chattel Mortgage GST Refund | Finance Lease (Monthly GST Credit) |
|---|---|---|
| $55,000 | $5,000 upfront | ~$83/month over 5 years |
| $110,000 | $10,000 upfront | ~$167/month over 5 years |
| $220,000 | $20,000 upfront | ~$333/month over 5 years |
| $550,000 | $50,000 upfront | ~$833/month over 5 years |
For a business financing a $220,000 excavator, claiming $20,000 back on the next BAS versus spreading it over 60 months is a significant cash flow difference.
If your business isn't registered for GST (turnover under $75,000), you cannot claim GST credits under any structure. The full GST-inclusive price is your cost. In this case, the GST treatment difference between structures becomes irrelevant to your decision.
However, if you're approaching the $75,000 threshold, it may be worth registering voluntarily before making a large asset purchase to access the GST credit.
Yes, if you're GST registered. Under chattel mortgage or hire purchase, you claim the full purchase price GST upfront. Under a lease, you claim the GST component of each rental payment progressively.
For passenger vehicles, the GST credit is capped at 1/11th of the car cost limit (currently ~$69,674). So the maximum GST credit on a car is approximately $6,334. This doesn't apply to commercial vehicles like trucks or utes over 1 tonne payload.
No. Financial supplies (interest, loan fees) are GST-free. You only claim GST on the asset purchase price (chattel mortgage) or the rental component of lease payments (finance/operating lease).
Chattel mortgage gives the best immediate GST outcome because you claim the full purchase price GST upfront. Under a lease, you get the same total GST back but spread over the lease term. If cash flow timing matters, chattel mortgage wins.
Our calculator shows the real cost of each structure including GST treatment and tax deductions.
Open Calculator →