Cash flow
A chattel mortgage returns the GST on your next BAS
Where you account for GST on a non-cash basis, the ATO allows the entire input tax credit in the period you receive the invoice or make a payment, rather than spread across the term. On a $110,000 system that is roughly $10,000 back on the next BAS, which businesses frequently use to fund the deposit or the installation costs asset finance will not cover.
Leases, rentals and PPAs return the GST in small slices instead, one-eleventh of each payment. For a business managing cash, this is often the deciding factor between structures.
Watch this one
Why a finance lease rarely suits solar
The ATO sets minimum residual values by the asset's effective life (TD 93/142). Solar PV has a 20-year effective life, so a five-year finance lease over a solar system carries a minimum residual of 56.25% of cost. That is a very large lump sum waiting at the end of term.
Much of the finance content online quotes the 65.63% / 46.88% / 28.13% figures instead. Those are the eight-year column, the one that applies to cars, not solar. Applied to a solar lease they make it look far cheaper than it is. A chattel mortgage balloon is not governed by this table at all, because a chattel mortgage is a loan, not a lease.
If you lease your premises
Rooftop solar is a fixture, and that changes your options
Once an array is bolted to a building it becomes a fixture, and the Personal Property Securities Act doesn't extend to fixtures. A financier can't perfect a security interest over it on the PPSR, and an affixed system is hard to repossess. So a plain chattel mortgage is the weakest security position for rooftop solar, even though it's the most marketed.
The market works around this rather than solving it: rental and payment-plan structures where the financier simply owns the equipment, verified tenancy, a lease term that outlasts the finance term, and the right to novate the agreement to your landlord or the incoming tenant if you move out.
If you lease your premises, or the remaining lease term is short, the realistic options are a rental payment plan, a PPA, an Environmental Upgrade Agreement, or a business loan, not a chattel mortgage. Landlord consent will be required either way.
Note: fixture status is a security and property law question, not a tax one. Rooftop solar stays a depreciating asset with a 20-year effective life regardless.
Rarely covered
Environmental Upgrade Agreements solve the landlord problem
An EUA is a three-way arrangement between a finance provider, the building owner and a participating local council. Repayments are collected as a special charge on the council rates, which produces two things nothing else offers. Because the obligation attaches to the property, it can be secured at a lower rate over a longer term, and if the building is sold, the remaining liability passes to the new owner.
It also allows an owner to pass a portion of the cost to tenants who benefit from the lower bills, resolving the split-incentive problem that stalls so many commercial retrofits. Legislation ensures tenants aren't left worse off. Available in Victoria, New South Wales and South Australia, with eligibility varying by council.
The funding gap
What asset finance usually won't cover
Bank green equipment finance funds the asset. The CEFC's own wording is that finance covers up to 100% of the cost of equipment, not the cost of the project. Eligibility is driven by tax invoices for the assets themselves, which is the practical mechanism by which other line items drop out.
Typically outside scope: installation labour, electrical and switchboard works, scaffolding and lift hire, roof strengthening, permits, grid connection and network fees, and design and engineering. Specialist energy financiers do fund the installed contract price, and at least one caps its separate soft-cost facility at $20,000, which tells you how tightly these costs are ring-fenced.
These costs are usually funded by capitalising them into a payment plan, rolling them into an EUA, or a business loan. Worth knowing: installation costs still form part of the asset's depreciable cost even when they can't be financed as an asset. How you fund something and how it's taxed are separate questions.
Common myths
Three things you'll read elsewhere that aren't right
"Solar is 100% instantly written off." The instant asset write-off is permanent but capped at $20,000 per asset and limited to businesses under $10m aggregated turnover using the simplified depreciation rules. A commercial system almost always costs more, so it goes to the small business pool at 15% then 30%, and businesses at $10m+ turnover get no write-off at all.
"Claim the 20% energy bonus deduction." The Small Business Energy Incentive applied only to spending between 1 July 2023 and 30 June 2024 and has lapsed. It also expressly excluded assets whose main purpose is generating electricity, solar panels among them, so it never applied to solar anyway.
"An operating lease is off balance sheet." Under AASB 16 lessees recognise a right-of-use asset and a lease liability for most leases over 12 months. Whether anything sits off balance sheet now depends on the exemptions and on which reporting framework your entity actually applies. A PPA may also meet the lease definition; that is a judgement for your accountant, not a given.