Hire equipment and pay it off. Ownership transfers at end. GST claimed progressively. Perfect for non-GST businesses.
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Hire Purchase is an equipment finance structure where you hire the asset and make regular repayments, and at the end of the loan term, ownership transfers to you for a nominal fee (typically $1 to $100). It's similar in outcome to Chattel Mortgage but differs in legal ownership timing and tax treatment.
The key difference is GST treatment. With Hire Purchase, GST is included in your monthly repayments and if you're GST registered, you claim 1/11th of each payment as a credit on your BAS. This contrasts with Chattel Mortgage where you claim all GST upfront. For businesses not registered for GST, this difference doesn't matter — making Hire Purchase a popular choice.
Tax deductions also differ. With Hire Purchase, you claim the full rental payment (principal + interest) as a business expense, rather than separating interest and depreciation like Chattel Mortgage. Whether this is more beneficial depends on your specific tax structure — your accountant can advise which approach minimizes your tax liability.
Despite ownership transferring at loan end rather than day one, you have full use of the equipment throughout the hire period. You can operate it commercially, generate revenue with it, and treat it as your own. The lender's interest is simply security until you complete payments.
Kreddi works with 100+ specialist equipment lenders who offer competitive Hire Purchase rates from 6% p.a. We can structure either Hire Purchase or Chattel Mortgage depending on which suits your business better.
An alternative equipment finance structure with unique benefits.
No need to claim GST upfront or have large cash reserves. GST is included in repayments and claimed progressively, making it suitable for businesses not registered for GST.
Claim the entire rental payment (principal + interest) as a tax deduction. Different from chattel mortgage but can be beneficial depending on your tax structure.
Make the final payment (often $1 or $100) and ownership automatically transfers to you. No additional paperwork or fees required.
Hire Purchase applications approved quickly, typically 24-48 hours for established businesses. Same structure used for vehicles, machinery, and equipment.
Choose 1-7 year terms with optional balloon payments. Seasonal payment structures available for agricultural and seasonal businesses.
Perfect if you're not registered for GST or have specific tax reasons to prefer hire purchase over chattel mortgage.
Progressive GST claims. Full payment tax deductible. Ownership at end.
If your business isn't GST registered, Hire Purchase makes more sense than Chattel Mortgage. You can't claim GST upfront anyway, so the progressive GST treatment doesn't disadvantage you.
Some tax structures benefit from claiming the full rental payment as an expense rather than separating interest and depreciation. Consult your accountant.
While similar to chattel mortgage in outcome, some businesses prefer the psychological or accounting treatment of "hiring" the asset until final payment.
If claiming GST upfront creates cash flow issues (you need to pay the GST before claiming it back), Hire Purchase spreads this out across the loan term.
Still Unsure? We can help you choose between Hire Purchase and Chattel Mortgage based on your GST registration, tax structure, and cash flow. Both options have identical interest rates and loan terms — the difference is purely in tax and GST treatment.
Select the equipment you need and get quotes from suppliers. Apply for Hire Purchase through Kreddi — we'll compare offers from multiple specialist equipment lenders.
Most Hire Purchase applications receive conditional approval within 1-2 business days. We'll negotiate the best rate and structure the agreement to suit your cash flow.
Sign the Hire Purchase agreement. Lender pays supplier directly. You take delivery of equipment and start using it immediately for your business.
Pay monthly, quarterly, or seasonal repayments. Claim full rental payment as tax deduction. If GST registered, claim 1/11th of each payment on your BAS.
At loan end, make final payment (usually $1-$100) plus any balloon payment. Ownership automatically transfers. Lender removes security interest.
New restaurant, not yet GST registered, needs full kitchen equipment
Hire Purchase is an equipment finance structure where you hire the asset and make regular payments until the end of the loan term, at which point ownership transfers to you (usually for a nominal fee like $1 or $100). The key differences from Chattel Mortgage are: (1) ownership transfers at loan end rather than day one, (2) GST is claimed progressively (1/11th of each payment) rather than upfront, (3) you claim the full rental payment as a tax deduction rather than separating interest and depreciation. Despite these accounting differences, both structures result in you owning the asset at loan end.
With Hire Purchase, GST is included in your monthly repayments and claimed progressively if you're GST registered. Each payment you make includes GST, and you claim 1/11th of each payment as a GST credit on your BAS. For example, if your monthly payment is $2,200, you claim $200 GST credit each month. This differs from Chattel Mortgage where you claim all the GST upfront on your next BAS. If you're not registered for GST, this doesn't matter — you simply make the repayments without claiming any GST.
With Hire Purchase, you claim the full rental payment (principal + interest) as a tax deduction, not just the interest component. This is different from Chattel Mortgage where you claim interest and depreciation separately. For example, if your monthly payment is $2,000, the full $2,000 is tax deductible as a rental expense. Whether this is more beneficial than chattel mortgage depends on your specific tax situation — consult your accountant. The instant asset write-off doesn't apply to hire purchase since you don't own the asset until loan end.
Ownership transfers when you make the final payment specified in your Hire Purchase agreement, which is typically a nominal amount like $1, $10, or $100. This final payment is separate from any balloon payment (residual value). For example, you might have a 5-year hire purchase with a $20,000 balloon payment in year 5, plus a final $100 ownership transfer payment. Once you pay both amounts, the lender transfers ownership and removes their security interest. The transfer is automatic and doesn't require additional applications or approvals.
Most businesses registered for GST prefer Chattel Mortgage because claiming GST upfront improves cash flow significantly. However, Hire Purchase is better if: (1) you're not GST registered, (2) your accountant advises that claiming full rental payments suits your tax structure better than interest + depreciation, (3) you prefer spreading the GST claim across the loan term, or (4) you have specific accounting or cash flow reasons. The interest rates and loan structures are virtually identical between the two options — the choice is primarily about GST and tax treatment. We can arrange either structure.
Yes, balloon payments (also called residual values) are available with Hire Purchase just like Chattel Mortgage. You can defer 10-50% of the loan amount to the end of the term, reducing monthly repayments significantly. For example, a $100,000 loan over 5 years at 7.5% with a 30% balloon reduces monthly payments from $2,004 to approximately $1,503. At loan end, you pay the balloon payment plus the nominal ownership transfer fee (usually $1-$100), and ownership transfers. You can pay the balloon in cash, refinance it, trade in the equipment, or sell it privately.
Hire Purchase rates are virtually identical to Chattel Mortgage rates, typically ranging from 6% to 11% p.a. for established businesses. New equipment from reputable manufacturers attracts the best rates (6-8% p.a.), while used or older equipment is higher (8-11% p.a.). Your rate depends on business trading history, credit profile, equipment age and type, loan amount, and deposit size. Businesses under 2 years old or with credit issues may pay 11-12% p.a. The choice between hire purchase and chattel mortgage doesn't affect your interest rate — lenders price them the same.
Yes, you can pay out Hire Purchase agreements early, though some lenders charge early termination fees (typically 1-3 months interest). When you pay out early, you pay the remaining principal plus any balloon payment, early termination fees, and the nominal ownership transfer fee. Ownership then transfers immediately. This is useful if you want to sell the equipment, trade up to newer models, or if your business has surplus cash and wants to reduce interest costs. Always check your contract for early termination clauses, and we can negotiate contracts with minimal or no early exit fees.
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