Should you buy or lease your business assets?
Clarke McEwan Accountants
There are certain items of equipment, machinery and hardware that are essential to the operation of your business – whether it's the delivery van you use to run your home-delivery food service, or the high-end digital printer you use to run your print business.
But when a critical business asset is required, should you buy this item outright, or should you lease the item and pay for it in handy monthly instalments?
To buy or to lease? That is the question
Buying new pieces of business equipment, plant, machinery or vehicles can be an expensive investment. So, depending on your financial situation, it's important to weigh up the pros and cons of buying, or opting for a leasing option.
First of all, let's look at why you might decide to buy the item…
Buying: the pros and cons:
- Pro: It's a tangible asset – when you buy an item, you own the item outright and it will appear on your balance sheet as one your business assets. As such, by owning these assets outright you increase the perceived capital and value of your business. You can also claim the cost of the asset against your capital allowance for tax purposes.
- Pro: It's yours for the life of the asset – once you own the item, you have full use of the equipment for the duration of the life of the asset. Your use of the asset isn't reliant on you being able to keep up regular lease payments, and if your financial circumstances change then you can sell the asset to free up the capital.
- Con: It's an expensive outlay – paying for the item up-front is a large outlay for the business and will require you having the cash to cover this cost. Spending a large lump sum in this way may take cash away from other areas of the business, so you need to be 100% sure that this purchase is the right decision and a sound investment.
- Con: You may require extra funding – if you don't have the liquid cash available to buy the item outright, you may need to take out a loan. Asset finance is available from funding providers, but does tie you into a loan agreement that will add to your liabilities as a business – reducing your worth on the balance sheet.
Leasing: the pros and cons:
- Pro: Leasing has a cheaper entry point – if the item you need to purchase has a large price tag, leasing allows you to make use of the asset without the cost of buying it in full. For startups and smaller businesses with minimal capital behind them, this can make leasing a very attractive option. You may not own the asset, but you can make use of it – and this may be the difference between the success or failure of your business.
- Pro: You can spread the cost – there is still an associated cost of leasing, but you can spread the cost over a longer period, making it easier to find the necessary liquid cash to meet your lease payments. With this money saved, you can then invest in other areas of the business, helping you to expand, grow and bring in more customers and revenue.
- Con: You don't own the asset – there are different types of leasing agreement. Under a capital lease, you do own the asset (once you've paid if off). But if you opt for an operating lease, this is a more short-term lease and you won't own the asset at the end of the contract. Ownership does have its advantages (including being able to sell off the asset if required) so it's important to consider what kind of leasing agreement you're entering into and what the advantages/disadvantages may be.
- Con: You may pay more in the long run – most leasing agreements will attract additional costs and interest on your agreement, so you may well end up paying more than the market price for your asset in the long term. If you can cope with the higher cost, this is fine, but bear in mind that buying outright may have offered greater value.
- Con: You may lose the use of the asset – if you can't keep up your lease payments (due to poor cashflow for example) then the owner of the lease agreement may recall the asset. If this item is crucial to your business model, losing this key asset can have a profound impact on your ability to operate. In this respect, leasing is a more risky prospect, but also an easier option for businesses with less cash to splash.
Talk to us about whether buying or leasing is the best way forward
Whether you opt to buy or lease your equipment isn't always a straightforward decision to make – so it's a good idea to consult with your accountant early on in the decision-making process.
We'll help you review your current financial position, assess your available cashflow and look at your regular cost base to decide whether buying or leasing is the right thing for the business.
At the Federal Budget in May 2026, the Government announced that it would reintroduce a loss carry back tax offset for companies, providing a crucial buffer to any business facing difficult trading conditions.
Tax Time 2026 is in full swing, and with that comes a decision for anyone who uses their car for work purposes: is it better to claim a deduction using the logbook or cents per kilometre method? When can I claim car expenses? Broadly, tax deductions for car expenses (i.e. the costs you incur to own and operate a car) are available where you use your car for work-related trips, such as for travel between workplaces or to perform your work duties. The exception is ordinary commuting to and from work - such expenses cannot typically be claimed, as they’re considered private expenses. Cents per kilometre method The cents per kilometre method allows you to claim a fixed rate for each work-related kilometre you travel, up to a maximum of 5,000 km each year. This fixed rate per km covers all of your car expenses for a year, including decline in value, registration and insurance, maintenance, repairs and fuel costs. For the 2025-26 tax year, the rate of deduction is 88 cents per kilometre, which means this tax time, the maximum potential amount of deduction is $4,400. (And keep in mind that the rate of deduction has been increased to 91 cents per km as of 1 July 2026, meaning a total potential deduction of $4,550 in the 2026-27 tax year). One of the benefits of using the cents per kilometre method is that it’s relatively simple, as you don’t need to keep receipts for your fuel or car expenses. However, you do need to keep records to show how you’ve calculated your work-related kilometres (for example, a diary), and you also need to be able to show that you own the car you’re using for work. Logbook method If you have a lot of work-related car expenses and have the time, you might find that the logbook method gives you the best deduction. The logbook method allows you to claim the work-related portion of your actual car expenses. This means that you can claim for a percentage of the actual expenses incurred on running costs such as fuel, electricity, servicing, registration, insurance and the decline in value, provided you’ve used the car in the course of your work. However, as the potential deductions under the logbook method are higher, there are stricter record-keeping requirements to meet. This includes keeping a logbook, which allows the calculation of how much you can claim back, it must: - cover at least 12 continuous weeks and be broadly representative of your travel, - include the reason and purpose, as well as the destination of every work-related journey, - the odometer reading at the start and end of each journey, - and the total kilometres travelled on the journey, - include odometer readings for the start and end of the logbook period and the total kilometres travelled during that period. Each journey in your logbook must be made at the end of the journey or as soon as possible afterwards. If you don't have a valid logbook, then unfortunately you cannot use the logbook method to claim car expenses, although the cents per km method may be available instead. Which is better? The answer to whether you should choose the logbook or cents per km method is very dependent on your personal situation. If you have light work-related car use and don’t love keeping extensive records, the cents per km method may be better suited to your needs, while those who use their car for work frequently may receive a higher deduction under the logbook method. If you’re unsure which method is best for you, speak to a member of our team today.
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To ensure passage of the negative gearing and CGT discount changes that were announced in the May 2026 Federal Budget the Government agreed to make amendments to the SMSF borrowing rules. SMSFs are able to borrow in restricted circumstances which includes borrowing under a limited recourse borrowing arrangement (LRBA) to purchase a single acquirable asset. While there have previously been no specific legislative restrictions on the type of asset a SMSF can borrow to purchase, most commonly we see LRBAs being used to purchase property. Up until this point, this could have been any type of real property. These amendments will mean that when SMSF trustees wish to borrow to purchase a property, it must meet the business real property (BRP) definition. This BRP definition relates to usage of the property rather than zoning or what the property was originally built for. This change became law on 26 June 2026, but the Bill includes a 45 day transitional period which will finish on 10 August 2026. This transitional period may allow for arrangements that are currently being implemented on non-BRP assets to be allowable under the new rules where settlement occurs after 10 August 2026, provided the arrangement to purchase the property was entered into on or before 10 August 2026. We recommend that SMSF trustees who are currently implementing LRBA arrangements on non-BRP assets seek specialist SMSF legal advice to ensure their arrangements meet these transitional rules. While this change has been referred to in the media as a ban on super funds borrowing to purchase residential property, the use of the BRP definition makes the change slightly more complex than this. As this definition relates to usage of the property, it is possible that some residentially designed properties could meet the BRP definition (for example, a medical practice that operates from a residentially designed terrace dwelling). The BRP definition also requires that the property is wholly and exclusively used for business purposes. This could mean that some properties that may initially appear to be commercial in nature may not meet the BRP definition (for example, a mixed use residential and retail property on a single title). We recommend that SMSF trustees entering into new LRBAs seek advice from specialist legal and financial advisers to ensure the new requirements are met. Existing arrangements The updated rules allow for existing LRBAs over non-BRP assets to continue. They also allow for existing arrangements to be refinanced, subject to lender availability and approval. For any further information please contact our office.
