Truck finance tax deductions vary with credit facilities, realised with payment deductions or depreciation, and can be a major consideration at tax time. In addition to the tax benefits of different credit facilities on the business, at tax time this year, operators also have other impacts to consider. Specifically, how the policies in the Federal Budget affect their operation, the current inflation and interest rate scenario, and the fuel situation.
There is a lot to cover and not much time for operators looking to capitalise on opportunities before 30 June. Here’s a quick overview of some of the key issues for operators to consider as we approach tax time.
Truck Finance Tax Deductions
Federal Budgets and RBA rate decisions have not changed the tax deductions applicable to heavy vehicle loans. Deductions on existing loans can be claimed in the 2025/26 tax return.
Any new heavy vehicle loans settled before 30 June would be subject to the relevant tax deductions. Any repayments made on Leasing and Rent-to-Own before 30 June can be deducted in the 2025/26 tax return. With Chattel Mortgage and CHP, depreciation would be assessed on the relevant proportion of the asset value for a deduction in 2025/26. This should be handled by your accountant when preparing the annual accounts and tax return.
Chattel Mortgage and CHP do allow for the full amount of GST on a vehicle purchase to be claimed on the next BAS return. For vehicles financed and settled before 30 June, businesses can claim the full GST. This may be an attractive opportunity to reduce the BAS due in the March-June quarter or for the 2025/26 year, depending on the payment schedule for the business.
A tax deduction opportunity is available with Instant Asset Write-off for small businesses on asset purchases up to $20,000. This is clearly not sufficient to cover the price of a new vehicle, but possibly sufficient for equipment or accessories. The acquisition needs to be acceptable as security for asset financing. The type of credit facility used to finance the acquisition is critical to IAWO – the asset must be ‘depreciable’. That means on the business balance sheet and subject to depreciation.
Chattel Mortgage and Commercial Hire Purchase (CHP) provide tax deductions through asset depreciation. Businesses that use the cash accounting method can select Chattel Mortgage. Businesses using the accruals method can use CHP. For a quick quote and prompt attention in sourcing financing to take advantage of this opportunity in this tax year, connect with one of our brokers.
Truck Finance Interest Rates Outlook
For businesses looking to invest in new vehicles to start the new financial year, the concern will no doubt be what will happen with asset finance rates. With inflation continuing to rise, the Reserve Bank Monetary Policy Board raised the cash rate by a further 0.25% at its May meeting.
The next monetary policy decision, cash rate decision, is due on 16 June. Expectations are that inflation would have risen further by this time. In announcing the May decision, Michele Bullock, Governor of the RBA, said that ‘flow-through’ effects could be seen on goods and services prices as a result of the continuing conflict in the Middle East and the resultant higher fuel prices. The release of the latest unemployment figures will also influence the Board’s decision.
The May decision sees three consecutive cash rate increases. As a result, most lenders, including those in the commercial credit sector, have adjusted their rates. Existing heavy vehicle loans with fixed rates will not be impacted by RBA cash rate or lender rate rises. Operators with Overdrafts or Unsecured Business Loans at variable rates will likely have seen their rates increase.
Operators in the market for new vehicles for the start of the financial year can secure the most competitive rates available through Jade.
Truck Finance and The Budget
Treasurer Jim Chalmers handed down the 2026/27 Federal Budget on 12 May. This is the first step as the Budget Bill needs to be passed by the House of Representatives and the Senate to become law and for the policies to be implemented.
Included in the Budget is making the ruling for Instant Asset Write-Off of assets under $20,000 for small businesses permanent. This could represent an opportunity for businesses investing in new equipment for the vehicle that is eligible for asset financing and is financed with Chattel Mortgage or CHP. Loss carry-over 2 years would also be permanent for small operators.
Trusts received a Budget mention with a proposed 30% minimum tax rate on discretionary distributions. Operators with this operational structure should seek advice from an accountant regarding the impacts for them. If the Budget is passed, changes to CGT and negative gearing could have impacts on business operators.
Other than IAWO, there are no changes to asset finance credit facility features and tax deductions.
Ensure you secure your most affordable Truck Finance – use the experts from Jade Truck Loans, call 1300 000 003.
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