Discover how Australian clinics can claim major tax savings through equipment financing. Learn about IAWO, GST credits, and EOFY strategies.
Key takeaways
- Instant Asset Write-Off (IAWO): Medical practices can instantly deduct the cost of eligible assets up to $20,000 per item under the current FY 2024–25 limit—major tax savings available.
- Depreciation for high-value items: For equipment over the $20,000 threshold, simplified depreciation rules allow 15% deduction in year one and 30% in subsequent years.
- GST credits: GST-registered clinics can claim GST on financed equipment (e.g., $3,000 GST credit on a $33,000 X-ray machine).
- Interest deductions: The interest component of finance repayments (loans, chattel mortgages) is tax deductible.
- Leasing vs loan tax outcomes: Operating leases allow deduction of the full lease payment, while ownership-based finance (e.g. chattel mortgage) enables depreciation and interest deductions.
- Cash flow management: Financing reduces upfront capital strain while still unlocking key tax benefits.
- Eligibility criteria: Clinics must have less than $10 million annual turnover to access small business tax concessions.
- EOFY strategy: Ensure equipment is installed and operational before 30 June to claim deductions this financial year.
Introduction
Purchasing medical equipment is one of the most significant capital expenses for healthcare clinics, imaging centres, and allied health businesses in Australia. Whether it's a digital ultrasound machine, ECG monitor, or advanced diagnostic system, these purchases are essential—but costly. The good news? When strategically financed, they can deliver substantial tax savings and cash flow advantages.
This guide will walk you through the tax benefits of financing medical equipment in Australia, helping you understand which finance structures work best, how to unlock deductions and credits, and how to prepare your clinic to take full advantage of these opportunities—backed by relevant Australian tax policy and data.
Financing options for medical equipment
Chattel mortgage (equipment loan)
- Clinic owns the equipment immediately.
- Fixed monthly repayments.
- Tax deductions include depreciation + interest.
Finance lease (operating lease)
- Financier owns the asset.
- Clinic pays monthly lease payments.
- 100% of lease payments are tax deductible.
Commercial hire purchase (CHP)
- Clinic gains ownership at the end of the term.
- Repayments include interest and principal.
- Similar tax treatment to chattel mortgage.
Each option has specific tax and ownership outcomes, so aligning the structure with your clinic’s financial goals is essential.
How the Instant Asset Write-Off works
Eligibility criteria
Under the Instant Asset Write-Off (IAWO) scheme:
- Applies to businesses with turnover less than $10 million.
- The asset threshold is $20,000 per asset for FY 2024–25.
- The equipment must be installed and ready for use by 30 June 2025.
What this means for your clinic
If your clinic finances a $19,000 vital signs monitor through a chattel mortgage:
- The entire amount is deductible in this financial year.
- At a company tax rate of 25%, that equals $4,750 in tax savings.
Larger purchases: simplified depreciation
For financed equipment exceeding $20,000:
- You can pool it into a general small business pool.
- Deduct 15% in year one, then 30% each following year.
This approach ensures that even higher-value items still deliver structured, ongoing tax savings.
GST credits on financed medical equipment
Claim GST upfront
GST-registered businesses can claim back the GST paid on financed equipment.
Example:
- A $33,000 digital imaging system includes $3,000 GST.
- Your clinic can claim the $3,000 in your next BAS.
Timing the claim
You can claim GST when:
- The invoice is issued and
- The asset is delivered or the first payment is made
Ensure your accounting software and bookkeeper are aligned to lodge in the correct BAS period.
Interest and repayment deductions
Chattel mortgage
- Deduct only the interest component.
- Also depreciate the asset according to IAWO or pool rules.
Operating lease
- Deduct full monthly lease payments.
- No depreciation or interest claim, as you don’t own the asset.
Balloon payments
- Not deductible as a lump sum.
- If refinanced, the interest on the balloon is deductible.
End-of-financial-year (EOFY) strategies
Time purchases wisely
To maximise deductions:
- Ensure assets are installed and ready by 30 June.
- Even a single payment before EOFY may allow you to claim a deduction in the current tax year.
EOFY use case
Clinic purchases a $19,500 ECG system via chattel mortgage on 25 June:
- Equipment is delivered and operational on 28 June.
- Clinic deducts entire $19,500 for FY 2024–25.
- Cash flow benefit = $4,875 tax savings.
Strategic finance structuring tips
Break down purchases
If purchasing multiple devices:
- Structure purchases under $20,000 per item.
- Separate contracts may enable multiple IAWO claims.
Bundle with fit-out
- Some fit-out items like cabinetry or treatment beds may also qualify.
- Confirm deductibility with your accountant.
Avoid common pitfalls
- Don’t delay installation beyond 30 June.
- Ensure your turnover and use cases meet ATO eligibility.
- Always document usage as business use only.
Common medical equipment that qualifies for tax benefits
- Ultrasound machines ($10,000–$60,000)
- ECG monitors ($3,000–$15,000)
- Patient monitoring systems ($5,000–$25,000)
- Diagnostic imaging equipment ($20,000–$120,000)
- Autoclaves and sterilisation units ($3,000–$10,000)
- Examination tables and chairs ($2,000–$8,000)
- ENT diagnostic tools ($4,000–$12,000)
- Defibrillators ($2,500–$5,000)
Each item must be used primarily for business purposes and meet IAWO or depreciation eligibility.
Real-world scenario: how tax benefits improve ROI
Clinic profile:
- GP practice finances a $28,000 portable ultrasound unit on 15 May 2025.
- Uses chattel mortgage over 4 years.
Tax year 1 benefits:
- Claims $2,545 GST (via BAS)
- Depreciates $4,200 (15%)
- Deducts $850 in interest
- Total tax-effective benefit: $2,763 (25% of $11,050 combined deductions)
ROI impact:
- Improved cash flow
- Reduced net equipment cost
- Aligns capital investment with growth in diagnostic capacity
FAQs on tax benefits of medical equipment financing in Australia
Q1: Can I claim tax benefits on leased medical equipment?
Yes. With an operating lease, you can claim the entire lease payment as a deduction each year.
Q2: Can I claim the GST on equipment I finance?
Yes, provided your clinic is GST registered, you can claim the full GST amount in your next BAS.
Q3: Does the Instant Asset Write-Off apply to second-hand equipment?
Yes, both new and used assets qualify—provided they’re under the $20,000 threshold and meet other conditions.
Q4: What if I buy equipment just before EOFY?
As long as the equipment is installed and ready for use before 30 June, you can still claim the deduction for that financial year.
Q5: How do I know if I qualify for small business tax concessions?
Your aggregated turnover must be less than $10 million to access IAWO and simplified depreciation rules.
Q6: Do all finance structures offer the same tax benefits?
No. A chattel mortgage enables depreciation and interest deductions; an operating lease allows deduction of lease payments only.
Q7: Can I claim balloon payments?
Only the interest portion of a refinanced balloon is deductible—not the full amount.
Final thoughts
Medical equipment financing isn’t just a pathway to accessing the latest technology—it’s also a powerful tax optimisation tool for Australian healthcare clinics. By leveraging instant asset write-offs, GST credits, and interest deductions, clinics can boost cash flow while growing their capacity to deliver patient care.
To unlock these benefits, work with a tax-aware finance provider and a registered accountant to tailor your strategy to your clinic’s needs. With smart planning, your next equipment upgrade could do more than improve service—it could also deliver a meaningful return at tax time.
