Sale and leaseback vs a business loan: two ways to unlock cash from gear you own

Both options start in the same place: a yard full of excavators, tippers or forklifts that are paid off, and a business that needs cash more than it needs a clean equipment register. The difference is a single question with surprisingly large consequences. After the money lands, who owns the machines?

Under a sale and leaseback, the financier does. Under a business loan, you still do. Almost everything else on this page, from the tax bill to the end-of-term options, flows from that one fact.

The comparison at a glance

	Sale and leaseback	Business loan against the gear
What happens to the asset	Sold to the financier, leased back to you	Stays yours; financier registers security
Cash released	The agreed sale price	The approved loan amount
How the amount is set	Financier’s valuation, often near wholesale	Financier’s valuation, often near wholesale
Tax on day one	Disposal of a depreciating asset, possible assessable gain	None, borrowing isn’t income
GST on day one	Generally payable on the sale if you’re registered	None on the loan itself
Ongoing tax	Lease payments generally deductible	Interest generally deductible; you keep claiming depreciation
End of term	Pay a residual to buy back, extend, or hand back	Asset is yours free and clear
Paperwork	Valuation, sale contract, lease	Valuation, loan contract, PPSR registration

Notice that the cash released can look much the same. Where the two part ways is what reaches your bank account after the ATO has had its say, and what you hold at the end.

Where does the write-off trap come in?

This is the insight most leaseback conversations skip, and it matters more now that small businesses can write off assets under $20,000 straight away on a permanent basis.

When you sell a depreciating asset, the ATO treats it as a balancing adjustment event. You compare the sale price with the asset’s adjustable value, meaning its cost less the depreciation already claimed. If you sell for more than that value, the excess is assessable income.

Assets that were instantly written off, or that sit deep in the small business pool, can have a tax value of close to nothing. Sell a tipper with a nil tax value to a financier for $60k and, broadly speaking, $60k of extra income shows up in that year’s return. For a company, that’s real tax on money you’ve just been handed to spend elsewhere. Pool assets are adjusted through the pool instead, but the effect on taxable income is similar.

A loan against the same tipper triggers none of this. Borrowed money isn’t income, and the asset stays on your books with its depreciation history intact. Check the numbers with your accountant before signing either way.

What about GST?

A GST-registered business that sells equipment is generally making a taxable supply. On a $66k leaseback sale, $6k is GST, and that goes to the ATO with your next BAS. You then pay GST on each lease instalment, which you can generally claim back. The net effect over the term may be close to neutral, but the timing is lopsided: you hand over the GST on the sale in one lump, then recover the GST on lease payments bit by bit.

If cash flow is the whole reason you’re doing this, that timing gap matters.

When does sale and leaseback win?

• The assets have a high tax value. Recently bought gear that hasn’t been heavily depreciated creates little or no assessable gain on sale, so the tax trap barely applies.
• You value what the lease can bundle in. Some leases include servicing or let you upgrade mid-term, which a plain loan doesn’t.
• You’re happy not to own the gear in five years. If you replace machines on a cycle anyway, handing them back at the end can be tidier than selling them yourself.
• Your existing lenders restrict new borrowing. A covenant on a bank facility may block further debt but not a lease. Read your facility terms first.
• Property stays off the table. A leaseback leans on the machines themselves, so the family home isn’t drawn in.

The sale and leaseback loan-type page covers which assets financiers accept and how valuations work.

Where a loan comes out ahead

• The gear has been written off. If the sale would create a large assessable gain, borrowing against the asset avoids that entirely.
• You want to own it outright at the end. Once the loan is repaid, the machine is yours, with no residual to negotiate.
• You need more than the equipment supports. A secured business loan can draw on property as well, lifting the amount beyond what the yard is worth.
• You need it fast. An asset finance refinance or a property-backed loan can be quicker than a sale, valuation and lease set-up, depending on the lender.
• You might sell the business. Owned assets add to what a buyer pays for; leased ones come with an obligation attached.

Got a yard of paid-off gear and a cash need? Send us the basics and we’ll weigh both routes against your numbers.

A worked example

An earthmoving contractor owns three excavators outright. A financier values them at $210k combined. The business needs about $180k to fund a council contract that pays in arrears. All figures are illustrative, before any interest or lease cost.

Leaseback route. Sale price $210k, including $19k GST. The machines were written off over earlier years, so their tax value is close to nil. The contractor remits $19k GST on the next BAS and faces tax on roughly $191k of extra assessable income that year. Spendable cash shrinks well below the headline.

Loan route. An equipment-secured loan of $180k against the same machines. No GST, no assessable gain, no change to the depreciation records. The contractor repays over three years and keeps clear title at the end.

In this example, the loan clearly wins. Flip one fact, say the excavators were bought eighteen months ago and still carry a high tax value, and the gap narrows enough that the leaseback’s other features might tip it.

Before you sign either one

1. What’s the tax value of each asset? Ask your accountant for the adjustable values.
2. Is the business registered for GST? If so, budget for the GST on any sale.
3. What does the lease’s residual or buyback cost? Get the full total in dollars. Our residual value entry explains how it’s set.
4. Is anything already registered on the PPSR? Existing security interests must be cleared under either route.
5. What’s the all-in dollar cost over the term? Put both quotes into the loan cost comparison calculator.

If you’re weighing a sale more broadly, our comparison of borrowing versus selling assets looks at outright disposal too.

Let’s look at your equipment together

Owners usually come to us with the machines, a figure in mind and no clear view of the tax side. Untangling that is the job. The form is short, around a minute of typing, nothing about it shows up on your credit report. We keep your details in-house rather than distributing them to a list of funders, and a specialist reads the enquiry personally and then calls. Tell us accurately what you own, what it’s worth and what’s still owing, and we can steer you toward the right structure on the first conversation.

Compare leaseback and loan options for your gear →