How does a chattel mortgage work?
The lender advances the purchase price, the supplier is paid in full at settlement, and you take ownership immediately. The asset itself secures the loan, which the lender registers on the Personal Property Securities Register, the national register of security interests over goods.
You then repay over a fixed term, usually one to seven years, at a fixed rate. Because the security is the asset rather than your home, approval rests mainly on the business and the asset, and low doc options exist for ABN holders whose latest financials understate real cash flow.
What are the tax benefits of a chattel mortgage?
Three main ones: the GST on the purchase price is generally claimable upfront, the interest is deductible, and so is depreciation, each to the extent the asset is used for business. Because the supplier is paid in full at settlement, a GST-registered business can usually claim the full GST credit on its next BAS rather than drip-feeding it over the term, whether it accounts on a cash or accruals basis.
Two figures worth knowing. Small businesses with turnover under $10 million can immediately write off eligible assets costing under $20,000 in the 2025-26 year, and the government has announced this threshold will become permanent from 1 July 2026, though that extension is still before Parliament. And cars carry a depreciation cost limit of $69,883 from 1 July 2026, which also caps the GST credit at $6,353, so a $120,000 dual cab does not get the full deduction some dealers imply.
The right structure depends on your figures, so run the tax side past your accountant. This is general information, not tax advice, and we coordinate with accountants on these purchases every week.
Chattel mortgage vs lease: what is the difference?
Under a chattel mortgage you own the asset and claim interest and depreciation. Under a lease the financier owns it and you claim the lease payments instead.
A finance lease can suit businesses that want the asset off their hands at term end, and an operating lease or rental suits short-term or fast-dating equipment. But for a vehicle or machine you intend to keep, ownership plus the upfront GST credit usually makes the chattel mortgage the sharper structure. Usually is not always, and the comparison is worth doing properly on your numbers.
What is a balloon payment?
A balloon, sometimes called a residual, is a lump sum deferred to the end of the loan to reduce the monthly repayments. You pay it out, refinance it, or sell the asset to cover it, and because you own the asset, that choice stays yours.
The trade-off is that interest accrues on the higher outstanding balance, so a big balloon costs more over the full term. Setting the balloon against the asset’s realistic end-of-term value, rather than against the lowest possible repayment, is where experience earns its keep.
What do lenders look for?
An active ABN, usually with some trading history, plus evidence the repayments fit your cash flow. GST registration, time in business, the asset’s age and whether it is bought from a dealer, at auction or privately all shift which lenders will lend and on what terms.
Fresh financials, heavy deductions or a previous decline do not end the conversation. They narrow the lender list, and knowing that list is the job. We work across 15 to 20 lenders and have settled more than $1.5 billion in lending, including plenty of assets other brokers would not know where to place.
Talk it through
If you are weighing up a ute, truck or machine for the business, the structure matters as much as the rate, and it is worth getting right before you sign anything at a dealership. Our business vehicle finance page covers how we arrange it, or call 1300 112 355. A real person answers, 24 hours a day, and you will get a straight answer: possible now, possible with changes, or not yet.