How Commercial Hire Purchase Works
- You choose the asset — truck, vehicle, equipment, or machinery.
- The lender buys it — the financier purchases the asset from the seller/dealer on your behalf.
- You "hire" it — you take immediate possession and make regular payments (weekly, fortnightly, or monthly) over the agreed term.
- Ownership transfers — when you make the final payment (including any balloon), the asset becomes yours.
Despite the name "hire purchase", the ATO treats you as the effective owner for tax purposes from day one. This means you can claim depreciation, interest deductions, and the GST credit upfront — identical to a chattel mortgage.
Hire Purchase vs Chattel Mortgage
These two structures are so similar that most lenders no longer distinguish between them. Here's the technical difference:
| Feature | Commercial Hire Purchase | Chattel Mortgage |
|---|---|---|
| Legal Ownership | Lender until final payment | You from day one |
| Tax Ownership | You (ATO treats as owner) | You |
| GST Credit | 100% upfront | 100% upfront |
| Depreciation | Yes (treated as owner) | Yes |
| Interest Deduction | Yes | Yes |
| Instant Asset Write-Off | Yes | Yes |
| Balloon Option | Yes (0–50%) | Yes (0–50%) |
| Modern Lender Term | Commercial Goods Loan (covers both) | |
Bottom line: The practical difference is negligible. Whether your contract says "hire purchase" or "chattel mortgage," the tax treatment, rates, and terms are the same. When applying through us, we'll secure the best rate regardless of which legal structure the lender uses.
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Get a Free Quote →Tax Benefits of Hire Purchase
- GST credit: If you're GST-registered, claim the full GST on the purchase price on your next BAS. For a $110,000 (inc GST) truck, that's $10,000 back in weeks.
- Interest deduction: The interest component of each payment is tax-deductible.
- Depreciation: Claim the asset's decline in value each year. Combine this with the instant asset write-off for eligible small businesses.
- Instant asset write-off: Small businesses may be able to immediately deduct the full business portion of the asset's cost. Check current thresholds →
Pros & Cons
Pros
- Strong tax deductions (GST + depreciation + interest)
- You use the asset from day one
- Flexible balloon/residual options
- Asset-secured — no need for property as collateral
- Available for new and used assets
Cons
- On-balance sheet (affects gearing ratios)
- Requires an ABN and business purpose
- More complex tax than lease structures (separate depreciation + interest)
- Early termination can be costly
Who Uses Hire Purchase?
- Owner-operators: Truck drivers financing their first prime mover
- Tradies: Buying utes and tools
- Farmers: Acquiring tractors, harvesters, and irrigation equipment
- Construction businesses: Excavators, loaders, and earthmoving machinery
- Manufacturers: CNC machines, presses, and production equipment
- Medical practices: Dental chairs, imaging equipment, surgical tools
FAQs
What is commercial hire purchase?▼
Commercial hire purchase (CHP) is a finance arrangement where a lender buys an asset on your behalf and hires it to you. You make regular payments over an agreed term, and ownership transfers to you at the end. It's functionally very similar to a chattel mortgage.
Is hire purchase the same as chattel mortgage?▼
They're very similar but technically different. Under a chattel mortgage, you own the asset from day one and the lender holds a mortgage over it. Under hire purchase, the lender owns the asset until the final payment. However, for tax purposes the ATO treats you as the owner in both cases, so the tax deductions are essentially identical. Most lenders now use the term "commercial goods loan" for both.
Can I claim GST on hire purchase?▼
Yes. If you're GST-registered, you can claim the full GST credit on the purchase price upfront — the same as a chattel mortgage. You claim it on your next BAS after settlement.
What happens at the end of a hire purchase?▼
If you have no balloon payment, ownership transfers automatically on the final payment. If you have a balloon, you pay the balloon amount and then own the asset outright. You can also refinance the balloon if needed.