Trailer Finance Tax Deductions and GST: What Businesses Can Claim
For businesses, how you finance a trailer affects what you may be able to claim. This is a plain-English overview to help you have a better conversation with your accountant.
General information only. Tax rules change and depend on your circumstances. Always confirm with your accountant or registered tax agent before making a decision based on tax.
GST credits
If your business is registered for GST and the trailer is used for business, you can generally claim a GST credit on its purchase. How and when you claim depends on the finance structure:
- Chattel mortgage: you buy the trailer, so the GST on the purchase price can usually be claimed in your next BAS, even though you're paying the trailer off over time.
- Finance lease: GST is built into each lease payment and claimed as you pay.
Getting the GST on a chattel mortgage back early is a real cash flow boost for many businesses, especially on larger trailers.
Interest and depreciation (chattel mortgage)
Because you own the trailer under a chattel mortgage, the deductions generally come from two places: the interest portion of your repayments, and the decline in value (depreciation) of the trailer. Small businesses may also be able to use simplified depreciation rules or the instant asset write-off if eligible. These thresholds and rules change from year to year, so check what applies in the financial year you buy.
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Send an Enquiry →Lease payments (finance lease)
With a finance lease, the lease payments themselves are generally deductible as a business expense, rather than interest and depreciation. The residual at the end of the lease is not deducted as you go.
Business use percentage
If a trailer is used partly for private purposes, deductions and GST credits generally only apply to the business-use share. Keep records that show how the trailer is used.
Questions to ask your accountant
- Is a chattel mortgage or finance lease better for my tax position this year?
- Can I claim the GST upfront, and how does my GST accounting method affect that?
- Am I eligible for any instant asset write-off or simplified depreciation this financial year?
- Would buying before or after 30 June make a difference?
- How should I treat a balloon or residual?
Once you know the structure your accountant prefers, tell your broker so the loan is set up that way from the start.