How to Finance a Commercial Fit-Out in Australia
There are 4 structurally different ways to fund a fit-out, and which one suits you turns on a single question that almost nobody asks early enough: which parts of your fit-out are separate assets, and which parts have become part of the building. That one line decides your security, your tax treatment and what you owe the landlord at the end.
The short answer
Commercial fit-outs are funded through 1 of 4 paths: a chattel mortgage over the fit-out assets, a commercial finance lease, a specialist fit-out facility, or a top-up against existing property security. Which suits you depends on your industry, asset mix, lease position and existing facilities. The decision underneath all of it is which items remain separate assets and which become part of the building, because the ATO treats a shop fitout as capital works, deductible only at the statutory rate of 2.5 or 4 per cent rather than over the term of your lease.
The line that decides everything
Most fit-out guides treat finance, tax and the lease as 3 separate problems. They are 1 problem, and it turns on a single distinction: is a given item a separate piece of plant, or has it become part of the building?
That line decides 3 things at once.
- What a lender can take security over. A chattel mortgage secures identifiable assets, registered on the Personal Property Securities Register, the government noticeboard of security interests in personal property. Something that has become part of the premises is not a chattel, so it is not available as security in the same way.
- How it is deducted. The ATO lists alterations and improvements to a leased building, including shop fitouts and leasehold improvements, as capital works. Separate items of plant are depreciating assets and follow different rules.
- What happens at the end of the lease. A make-good clause requiring you to strip the fit-out destroys the capital works, which has its own tax consequence, covered below.
Here is the part that catches almost every operator, and it comes straight from the ATO: deductions for leasehold improvements, including shop fitouts, cannot be claimed over their effective life or the term of the lease. They must be claimed at the statutory rate of either 2.5 or 4 per cent, whichever applies.
You can sign a 5 year lease, spend heavily on the fit-out, and find the tax system will only let you deduct a fraction of it while you are actually in the building.
That is not a loophole to plan around, it is the rule, and it is the reason the split between capital works and plant is worth getting right before the builder starts rather than after. The line itself is genuinely contested at the margins. The ATO has an entire taxation ruling, TR 2007/9, on when an item used to create atmosphere or ambience in a cafe, restaurant, licensed club, hotel, motel or retail shopping business counts as plant. If your accountant wants the itemised quote before they will answer, that is why.
We are not tax advisers and nothing here is tax advice. What we can tell you is that the itemised asset schedule your lender needs for security purposes is the same document your accountant needs for the deduction question, which is a good reason to insist on it from the builder at quoting stage.
The 4 real funding paths
There is no single product called fit-out finance sitting on a lender’s website. There are 4 structurally different ways to fund one, and most operators do not realise they have a choice until someone walks them through it.
| What you get | Chattel mortgage | Finance lease | Specialist facility | Property top-up |
|---|---|---|---|---|
| Who owns the assets | You do | The lender | Usually you | You do |
| Security taken | Registered interest over the assets on the PPSR | Lender retains ownership | Mixed, often assets plus guarantees | Real property |
| Typical term | 3 to 7 years | 3 to 5 years | 7 to 10 years | Matches the property loan |
| Typical speed | Days to weeks | Days to weeks | 2 to 4 weeks | 2 to 6 weeks |
| Usually suits | Hospitality, retail, gyms | Franchise and balance sheet sensitive operators | Medical, dental, large hospitality | Established operators with property equity |
Chattel mortgage. The common path for hospitality, retail and gym fit-outs. You own the assets from day one and the lender registers a security interest over them. It works best where the fit-out has a clear itemised asset list the lender can identify, which is the same reason it works best for the tax question. Our chattel mortgage page covers the structure.
Commercial finance lease. The lender owns the assets and the business pays rentals across the term. It changes how the arrangement sits on the balance sheet, which matters for franchise operators reporting to a head office, businesses preparing for sale, and operators with covenants on existing debt.
Specialist fit-out facility. Some lenders combine asset finance and working capital into one facility with industry-specific terms. Common in medical and dental, where equipment is purpose-built and values are high, and the terms tend to run longer with more flexible staged drawdown.
Top-up against existing property security. Where the owner already holds commercial property finance, releasing equity can fund the fit-out. Secured against real property rather than chattels, so it is usually the cheapest of the 4 and reliably the slowest, because a valuation and often a restructure of existing documents is involved. See our commercial property loan page.
Not sure which of the 4 your fit-out should use?
Send us the itemised quote and your lease, and we will tell you which structures your asset mix and lease tail actually support, what each does to your security position, and which questions to take to your accountant first. No obligation, and no fee at any point.
What changes by industry
The 4 structures are constant. The lender pool that competes for your file shifts considerably by industry, which is why a quote from a generalist lender can feel out of step with what a specialist in the same niche will do.
Cafes and restaurants. A mixed profile: cooking equipment, refrigeration, joinery, finishes, signage, point of sale. Lenders generally treat the equipment as straightforward chattel assets and the soft fit-out as a separate component. This is also the sector where the plant against capital works line is most argued over, which is precisely what TR 2007/9 addresses. Lease tail matters: hospitality leases commonly run in 5 year terms with options, and aligning the finance term to the first period is usually achievable.
Gyms and fitness. High-cost equipment with real resale value through specialist secondary markets, which lenders like, alongside a floor fit-out that often gets treated separately. Specialist lenders in this niche price differently from mainstream commercial lenders, particularly for franchise operators with a proven concept.
Dental and medical. Typically the highest-cost fit-outs in small business, with purpose-built equipment and a build to clinical standards. Specialist medical lenders dominate, because mainstream commercial teams do not see enough of these files to build the policies or the equipment resale relationships. Longer terms and combined facilities are common.
Retail. The most variable asset mix of the 4. A jewellery fit-out leans on security and high-end joinery, an apparel fit-out on shelving, lighting and change rooms, a hardware retailer on racking. Point of sale, security and signage are commonly financed separately from the shopfit, and for franchise concepts the franchisor’s preferred arrangement often shapes lender selection.
Staged drawdown and the cashflow gap
Most fit-outs are not paid to the builder in one go. The lender releases funds against the builder’s invoices at milestones: design sign-off, materials delivered, structural works complete, finishes complete, and practical completion. Larger fit-outs may need photographic evidence or a short site report at each stage.
The structure protects both sides. The lender’s exposure grows in line with work actually done, and the builder is paid in chunks matching their own supplier and labour commitments. The operator sits between the 2 schedules, and that is where the pressure lands.
The specific trap: builders commonly want a deposit on signing, and the lender’s first release commonly comes at a later milestone. You fund that gap from working capital. Across a build with several milestones, the cumulative gap can be material, and it is the single most common reason a fit-out that was fully financed on paper still causes a cash crunch. Model the cashflow across the build before you sign the builder’s contract, not after.
Make-good, and the balancing deduction
Most Australian commercial leases include a make-good clause requiring you to restore the premises at lease end. The form varies enormously. Restoration to base building condition effectively means stripping the fit-out. Restoration to good and tenantable repair is a far lower bar. The difference between those 2 phrases can be a very large obligation, and it is written into the lease you sign before the fit-out is even designed.
Lenders want the make-good position understood at application, for a structural reason: if the lease requires demolition of the fit-out at the end of the term, the lender’s security has a known expiry date. That is not automatically a problem, but it shapes the term offered, how much the lender will advance, and the guarantee position.
There is a tax dimension that connects back to the first section, and it is the one piece of good news in the make-good conversation. The ATO states that if the capital works are destroyed at the end of the lease, you may be able to claim a balancing deduction in the income year the destruction occurs. So the deduction you could not accelerate while you occupied the premises may come back at the point the fit-out is torn out. Whether that applies to your circumstances is a question for your accountant, but it is worth knowing before you treat make-good purely as a cost.
Make-good is a legal matter and it sits with the commercial lawyer reviewing your lease, not with a broker. Operators do negotiate refinements at lease signing, including capped obligations, clauses allowing the landlord to elect to keep the fit-out, and limits on what counts as a structural alteration. All of that is far cheaper to negotiate before signing than to argue about at the end of a term.
What lenders need to approve it
A clean fit-out file looks similar across the 4 paths, with the document mix varying at the margins.
- An itemised quote from a licensed fit-out builder. Separate line items for design, structural work, joinery, equipment and finishes. A single lump sum with no breakdown is a slow file at best and a decline at worst, and it also leaves your accountant unable to split capital works from plant.
- An itemised asset schedule. Essential for a chattel mortgage, because the assets are the security. Where some items are financed and some paid in cash, the schedule has to separate them clearly.
- The lease. A core document for leased premises. Lenders commonly want a lease tail long enough to cover the finance term, so a short remaining lease narrows the lender pool considerably.
- Two years of business financials plus a year to date profit and loss. For newer entities, director or parent company financials may stand in.
- Cashflow projections, particularly where the fit-out unlocks new revenue, showing the business can service the new commitment alongside existing ones.
- Personal guarantees from directors, close to universal in commercial fit-out finance whatever the structure.
Documentation gaps and lease review are the 2 most common reasons these files slow down, and both are fixable before you apply. The broader version of this is in what documents a commercial loan really requires.
How Intellect Finance can help
Fit-outs sit at the intersection of asset finance, commercial lending and a lease, which is why they are frequently structured badly by people who only do one of the three. What we do is work out which of the 4 paths your asset mix and lease tail actually support, put the file to lenders who write your industry rather than whoever is nearest, and flag the questions that belong with other advisers before they become expensive. We compare over 100 lenders and find the one that fits your situation. What we will not do is advise you on the capital works split, which is your accountant’s, or on the make-good clause, which is your commercial lawyer’s. Both of those conversations are cheaper before the builder starts. See our equipment finance page for the asset side, or commercial lending for the broader picture.
Business and commercial lending for a business purpose is not regulated consumer credit under the National Consumer Credit Protection Act 2009, and Best Interests Duty does not apply. We charge you nothing on any loan type, with no arrangement fee and no clawback recovery fee. Penrith based since 2005, holding Australian Credit Licence 390611.
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Frequently Asked
Fit-Out Finance FAQs
What operators ask most before committing to a fit-out.
How do you finance a commercial fit-out in Australia?
Through 1 of 4 structures: a chattel mortgage over the fit-out assets, a commercial finance lease, a specialist fit-out facility combining asset finance and working capital, or a top-up against existing property security. Which suits you depends on your industry, your asset mix, how much lease term remains, and what facilities you already hold.
Can I claim a shop fitout as a tax deduction over my lease term?
No. The ATO states that deductions for leasehold improvements, including shop fitouts, cannot be claimed over their effective life or the term of the lease. They must be claimed at the statutory capital works rate of either 2.5 or 4 per cent, whichever applies. Separate items of plant follow different rules. Confirm your position with your accountant.
What happens to the deduction if I have to remove the fit-out?
The ATO states that where capital works are destroyed at the end of a lease, you may be able to claim a balancing deduction in the income year the destruction occurs. So a make-good obligation that requires stripping the fit-out has a tax consequence as well as a cost. Whether it applies to you is a question for your accountant.
Why does my lender want to see the lease?
Two reasons. Lenders commonly want a lease tail long enough to cover the finance term, so a short remaining lease narrows the lender pool. And the make-good clause matters structurally: if the lease requires the fit-out to be demolished at the end of the term, the lender’s security has a known expiry date, which shapes the term and the amount offered.
What is staged drawdown and why does it cause cashflow problems?
The lender releases funds against the builder’s invoices at milestones rather than in one payment. The problem is timing: builders commonly want a deposit at signing while the lender’s first release comes at a later milestone, so you fund the gap from working capital. Across several milestones the cumulative gap can be material.
Do I need an itemised quote from the fit-out builder?
Yes, and insist on it at quoting stage. A lump sum with no breakdown slows or stops a chattel mortgage, because the assets are the lender’s security and the schedule has to identify them. The same document is what lets your accountant separate capital works from plant, so one request solves two problems.
Will I have to give a personal guarantee?
Almost certainly. Personal guarantees from directors are close to universal in commercial fit-out finance whatever the structure. A guarantee puts your personal position behind the entity’s obligations, so it should be reviewed by your own solicitor before signing, particularly if you are guaranteeing an entity you do not solely control.
How long does fit-out finance take to approve?
Typically days to weeks for a chattel mortgage or finance lease on a complete file, 2 to 4 weeks for a specialist facility, and 2 to 6 weeks for a property top-up because a valuation and often a restructure of existing documents is involved. These are typical ranges, not commitments, and no lender’s turnaround can be guaranteed.
Can I finance a fit-out if I do not own the premises?
Yes, and most fit-outs are on leased premises. It is the reason the chattel and lease structures exist: they secure against identifiable assets rather than real property. What the lease does affect is the term available, because lenders generally want the finance term to sit inside the remaining lease.
The bottom line
A fit-out looks like a purchase and behaves like 3 decisions taken at once. The finance structure, the tax treatment and the end-of-lease liability all run off the same distinction between what stays a separate asset and what becomes part of the building, and all 3 are effectively locked in by the time the builder starts.
The uncomfortable part is the timing mismatch nobody warns operators about. You commit to a lease of a fixed length, you fund the fit-out over a term the lender sets, and the tax system deducts leasehold improvements at a statutory rate that has nothing to do with either. Those 3 clocks do not line up, and the gap is worst for the operator on a short lease who has spent heavily on things that are now part of somebody else’s building.
Which is why the useful sequence is: itemised quote first, then the lease reviewed, then the accountant on the capital works split, and the finance structured around what those tell you. Doing it in the other order is how a fit-out that was fully funded on paper still hurts.
Joseph Sukkar
Joseph has worked in Australian finance for more than 25 years and has run Intellect Finance from Penrith since 2005. Fit-out files sit across asset finance, commercial lending and a lease, and the practice covers all three rather than treating the fit-out as an equipment purchase with extra steps. Intellect Finance charges clients no fee on any loan type. More about the team.
Sources
Australian Taxation Office, Capital works deductions, for the inclusion of alterations and improvements to a leased building, including shop fitouts and leasehold improvements, as capital works; for the statement that deductions for leasehold improvements cannot be claimed over their effective life or the term of the lease and must be claimed at the statutory rate of either 2.5 or 4.0 per cent; and for the balancing deduction where capital works are destroyed at the end of a lease. ato.gov.au
Australian Taxation Office, Taxation Ruling TR 2007/9, on the circumstances in which an item used to create a particular atmosphere or ambience for premises used in a cafe, restaurant, licensed club, hotel, motel or retail shopping business constitutes an item of plant. ato.gov.au
Australian Government Personal Property Securities Register, for the PPSR as the government noticeboard of security interests in personal property, including security registered over business assets. ppsr.gov.au
Australian Financial Complaints Authority, Small businesses with a financial complaint, for the position that responsible lending provisions do not apply to small business lending and that the lender is not required to make the same level of enquiries as for consumer lending. afca.org.au
Important disclosures, general advice warning and licensing
General information only. This article is general information only and does not constitute financial, credit, legal or tax advice. It does not take your personal or financial circumstances into account. Before acting on any information here, consider whether it is appropriate to your objectives, financial situation and needs.
Tax. Intellect Finance is not a registered tax agent and nothing on this page is tax advice. Descriptions of capital works and depreciating asset treatment are general summaries of published ATO guidance. Whether a particular item in your fit-out is capital works or plant, which statutory rate applies, and whether a balancing deduction is available on destruction, all depend on your circumstances and must be confirmed with your accountant or a registered tax agent. Thresholds, rates and rulings change.
Legal. Leases, make-good clauses and personal guarantees create obligations that outlast the fit-out. The lease should be reviewed by a commercial lawyer before signing, and anyone giving a guarantee should obtain independent legal advice from their own solicitor. Nothing here is legal advice on your lease.
Timeframes and structures are illustrative. Terms, speeds and structures described are typical observed ranges and general patterns, not any lender’s product, policy or service level. They are not commitments and no timeframe here should be relied on when agreeing a build schedule or a settlement date.
Lender policy varies and changes. Descriptions of common practice are general observations, not any lender’s policy. This page publishes no interest rates and names no lenders. No broker can guarantee approval, pricing, a valuation outcome or a timeframe.
Best Interests Duty. Business and commercial lending for a business purpose is not regulated consumer credit under the National Consumer Credit Protection Act 2009, and Best Interests Duty does not apply.
What we charge you. Nothing, on any loan type. No arrangement fee for residential, commercial, corporate, asset, SMSF or personal lending, no fee for complex or specialist lending, and no clawback recovery fee if a loan is discharged early. Lenders pay us a commission on settlement, disclosed to you in writing in our Credit Guide before we provide credit assistance.
About the reviews shown. The reviews displayed on this page are genuine reviews published by clients on Intellect Finance’s Google Business Profile, shown live via a third-party reviews widget. They reflect those individuals’ own experiences and are not a promise of any particular outcome.
Intellect Finance Pty Ltd holds Australian Credit Licence 390611 and is a member of the MFAA and AFCA. Lending criteria, fees and terms apply. Article checked 10 September 2026.
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Get the structure right before the build starts.
Send the itemised quote and the lease. You will leave knowing which of the 4 structures your asset mix and lease tail support, where the cashflow gap falls across the build, and which questions belong with your accountant and your lawyer before anything is signed. If the lease tail is too short to fund what you are planning, we will tell you that first. Penrith based since 2005, clients Australia-wide. No fee on any loan type. ACL 390611.
General information only, and not tax or legal advice. Capital works treatment and make-good obligations depend on your circumstances, and no broker can guarantee approval, pricing or a timeframe.
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