Best Medical Equipment Finance

Whether purchasing new or second-hand medical equipment, securing a cost-effective finance package is essential to realising your expected return on investment and containing operational costs within your set budget.

For the purchase of medical equipment finance, several commercial finance products are available, Chattel Mortgage, Leasing and Commercial Hire Purchase. Each includes a varying treatment of GST, tax deductible elements, balance sheet entries and depreciation. Some are suited to businesses implementing a cash accounting method others to an accrual accounting method.

All commercial finance products are available to all sizes and types of businesses: sole practitioners, partnerships, corporate medical centres and facilities, small to medium medical facilities and all sized organisations and institutions, subject to meeting lender requirements.

To decide which is the most suitable for your specific practice or facility, we advise discussing the options with your accountant or financial controller.

Chattel Mortgage for Medical Equipment

Chattel Mortgage is a very commonly used form of finance by many Australian businesses for the full range of business acquisitions as it suits the widely-used cash accounting method. The lender takes a mortgage over the equipment (chattel) for the term of the loan. The borrower has full use of the equipment during the loan period. When all payments are finalised, the lender releases the mortgage.

This type of finance is structured with a fixed interest rate, fixed monthly repayments over the fixed loan term and a balloon is an option.

The GST on the purchase price can be claimed on the next BAS, so GST is not applied or claimable on the monthly payments or balloon. The monthly repayments and balloon are not tax deductible in full, only the interest component is tax deductible.

Medical Equipment Comprehensive Hire Purchase (CHP)

CHP is also a popular finance facility for medical equipment purchases. The lender effectively purchases the equipment and ‘hires’ it to the borrower for a fixed monthly repayment. The borrower has full use of the asset during the loan term.

CHP includes an interest rate fixed for the loan term, a fixed monthly payment and a balloon is optional if required. The balloon is due for payment when all monthly payments are finalised.

On the next BAS after purchase, the GST on the full purchase price can be claimed. GST is not applicable to the monthly payments or balloon. The monthly repayments and balloon are not tax deductible in full, only the interest component is tax deductible.

Medical Equipment Leasing

Leasing is an off-balance sheet finance facility and suited to companies using an accrual accounting method. The lender effectively purchases the equipment and leases it back to the borrower over the lease term for a fixed monthly lease payment. As the lender retains ownership title the equipment appears on the lender’s balance sheet, not the borrower’s.

Asset leasing is usually structured with a fixed interest rate, fixed monthly lease payments and fixed lease term. A residual is optional, based on ATO guidelines.

GST is applied to the lease payments and residual which are considered operating expenses and are tax deductible. GST is not charged on the interest.