A Chattel Mortgage is a finance arrangement where ownership of the asset is held by the customer
from the time of purchase, although the financier ‘mortgages’ the asset as security against the loan.
How does a Chattel Mortgage work?
Under a Chattel Mortgage, the financier provides funds for the customer to purchase and take ownership of
the asset (chattel). The financier registers a “mortgage” over the asset as security against the loan.
Once the contract term is complete and any balloon (final instalment) has been paid, the financier
releases the charge.
Benefits of a Chattel Mortgage
- Flexible contract terms (from 12 to 60 months)
- Deposit may be used (via cash or trade-in asset)
- Repayments are fixed over the term of the contract
- Fixed interest rate
- Lower interest rates apply as finance is secured against the asset
- Structure with/without a residual payment at the end of the term to tailor repayments to suit your cash flow
- Tax deductible when used for business-related purposes
- GST registered customers can claim back the GST component of the asset price
- No GST charged on the monthly finance payments or residual
Is a Chattel Mortgage suitable for me?
A Chattel Mortgage is generally suitable for organisations (companies, partnerships, trusts and sole traders)
using the ‘Cash’ or ‘Accruals’ method of accounting for GST.
A Chattel Mortgage can also be adopted by individuals who use the asset mainly for business-related purposes.
In the past, Commercial Hire Purchases (CHPs) were a more popular option; however due to recent changes to
GST treatment of CHPs, a Chattel Mortgage is now a significantly more attractive option.
Other forms of business-related finance you may wish to consider include a
Finance Lease or
Commercial Hire Purchase (CHP).
Tax Implications of a Chattel Mortgage
Under a Chattel Mortgage, the entire GST component of the asset’s acquisition price can be claimed back on
the entity’s next Business Activity Statement (where the entity is GST registered and using the ‘Cash’ or
‘Accruals’ method), rather than claiming the GST over the term of the finance contract. Furthermore, you
may choose to pay an upfront deposit (equal to the GST component) to reduce the amount financed and the
interest payable over the contract term.
GST is not payable on Chattel Mortgage repayments.
Where there is business use of the asset, a tax deduction can be claimed for asset depreciation and interest
charges on the finance contract. If the asset is a motor vehicle, the depreciation claim would be limited to
the Car Depreciation Limit.
For individuals or organisations that are not registered for GST, a Chattel Mortgage will provide a lower
overall ‘effective cost’ compared to a Commercial Hire Purchase (CHP). Under a Chattel Mortgage there is
no GST payable on term charges, whereas a CHP will have GST payable on term charges but the customer will
not be eligible to claim back the GST. This will result in lower monthly repayments under the Chattel
Make an Enquiry
To obtain more information about a Chattel Mortgage and whether it would be suitable for you, please
contact Southgate on 1300 132 700 or
Disclaimer: We recommend that prior to entering any finance arrangement that you seek independent financial advice.
The information contained herein is of a general nature only and does not take into account your personal
circumstances. Southgate Financial Services Pty Ltd, its agents, employees and lenders accept no responsibility
for any loss that may arise.