Funding your medical equipment, the right way

Retinal cameras, refractors, exam chairs – they all cost a lot of money to buy.

Setting up your practice or upgrading it to the latest and greatest equipment can often cost six figures at the low end, even if you go for refurbished equipment. And there are many practices out there likely doing the same – the professional scientific services sector grew by $2.23 billion in 2018-19, which shows much growth in the area.

Funding your equipment may leave you with more questions than answers. Where do you start when it comes to getting medical equipment finance? Is a lease better than a loan? Will my bank take care of me?

There are many ways to finance your ophthalmic equipment and save money in the process. If your practice thrives on the cutting edge, leasing can often be a better way to get the right equipment and give your practice a pathway to upgrades.

Finance and operating leases

Operating leases are the best method to get access to equipment you intend to upgrade at the end of a lease term. Operating leases are shorter-term options, and you must hand the equipment back at the end of the lease term. You can choose to include regular maintenance costs or any other related expense as part of a lease. Regular operating lease repayments are classed as a business expense and can be deducted from your tax.

Finance leases are similar, though you’re given more flexibility at the end of the lease term. If you decide you need the equipment you’re leasing, you can pay a residual and take ownership. If you don’t, you can hand the equipment back and take on a new lease.

Equipment finance – chattel mortgages and hire purchases

Ophthalmology equipment has stayed the same for decades – and isn’t likely to change any time soon. For reliable equipment such as exam chairs or phoroptors, it may make more sense to buy outright.

The two options – which are almost identical – is the chattel mortgage and hire purchase. Both function in the same way – you make repayments on a loan secured against the equipment – though where the ownership lies is the main difference.

Ownership passes to your business immediately in a chattel mortgage, while your lender retains ownership in a hire purchase. This is a distinction for your accountant – whether your business wants to take on an asset or use the equipment and have it “off the books”.

Either way, you can access many tax incentives using both methods. You can claim the GST, interest, and depreciation (or have the savings passed on by your lender). You can also borrow more than the price or value of your equipment, which means you can pay off maintenance or installation in instalments.

“Chattel mortgages and hire purchases are optimised for business and the savings on tax are numerous,” says Savvy Managing Director and medical loan expert Bill Tsouvalas. “Combined with the instant asset write-off bumped up to $150,000 until the end of the year, it can give your business a real boost – or a leg up when starting out.”


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