Commercial Hire Purchase

What is it?

A Commercial Hire Purchase (also referred to as CHP, HP or Corporate Hire Purchase) is an agreement to acquire equipment based on fixed payments over an agreed fixed term. Ownership of the equipment is transferred to the lessee or borrower upon the final payment which may include a fixed residual or balloon payment.

Equipment commonly leased with Commercial Hire Purchase


No upfront cash outlay
Flexible terms between 2-5 years
Equipment ownership is transferred
to the lessee
GST benefits depending on accounting
method used by Lessee
Generally no need for mortgage security


Lease payments are not 100%
tax deductible
Approval criteria may be more stringent
than other products
Not flexible with upgrading equipment
May not provide best cash flow
outcomes due to tax treatment
More involved from an Accounting

What type of business uses Commercial Hire Purchase?

The CHP product is commonly utilised for motor vehicle acquisitions but is also better used by businesses acquiring plant and machinery or other equipment with useful lives of 5 years or greater. Generally CHP is the preferred option by businesses who prefer owning the equipment.

Tax and accounting treatment for Commercial Hire Purchase

The equipment is recognised as an asset in the lessee’s balance sheet. The interest component of the lease payment and the depreciation allowance for the equipment may be claimed as deductible for tax purposes. The GST on the equipment can be claimed upfront if the business uses the accruals accounting method.


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