What is a small-ticket lease?

You gather supplier quotes and approach a lender or broker; the lender assesses the asset, its value and your business profile, including your ABN and trading history. Because underwriting is simplified, approval and documentation are often quicker than for large-ticket equipment finance. The lease agreement sets the term, commonly 24 to 60 months, the payments, the fees and the end-of-term options.

The supplier delivers the equipment and you take possession while the lessor keeps ownership; you are typically responsible for maintenance, insurance and safe custody. Payments are fixed, monthly or quarterly, and cover finance charges and principal, sometimes with a residual at the end. At term end you return the equipment under an operating lease model, buy it at market value or the agreed residual, or refinance or extend, subject to fair wear-and-tear and return conditions.

Lease payments include a finance charge similar to interest, priced on your credit profile, term and asset type. One-off establishment or documentation fees apply at the start, some lenders add a small monthly account-keeping fee, and late payment and default fees are set out in the contract. Lenders often register a security interest on the PPSR, so check that the registration is discharged when the lease ends.

Small-ticket leases often have low or nil residuals, but read the contract for residual or balloon amounts you did not expect, especially any you are personally liable for. GST is generally charged on lease payments, and a GST-registered business can usually claim the input tax credits, although the treatment differs where the arrangement is in substance a sale. The instant asset write-off and other small business concessions can tip the lease-versus-buy decision, so check with your accountant and the ATO.

An equipment loan or chattel mortgage makes you the owner from the start, so you claim depreciation and interest; a hire purchase passes ownership after the final payment. A small-ticket lease keeps title with the lessor, which suits assets that need regular refreshing, such as IT, and businesses that want predictable monthly costs while conserving working capital and borrowing capacity.

The trade-offs are that you do not own the asset by default, the total finance cost can exceed an outright purchase or an unsecured loan, and maintenance and return conditions can add cost at the end of the term. Lease rentals are normally deductible where the lessor owns the asset, while a hire purchase or chattel mortgage splits the claim into interest and depreciation, and accounting rules can require right-of-use assets and lease liabilities on the balance sheet.