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Business Vehicle Finance

Chattel Mortgage

The tax-smart way to finance business vehicles. Claim the GST upfront, deduct interest as a business expense, and depreciate the asset over its effective life. Own the vehicle from day one.

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Chattel Mortgage Calculator

Business vehicle finance with tax benefits

Loan amount$50,000
$5,000$500,000
Interest rate6.49% p.a.
5.00% p.a.12.00% p.a.
Loan term5 years
1 year7 years
Monthly repayment
$978.07
Total interest
$8,684
Total repayment
$58,684
Principal 85.2%Interest 14.8%
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Estimates only. Actual rate and repayment depend on your lender, loan structure and credit assessment.

Chattel Mortgage at a Glance
  • You own the vehicle from day one, the lender holds a mortgage over it as security
  • Claim the full GST on the purchase price as an input tax credit (GST-registered businesses)
  • Interest payments are 100% tax-deductible as a business expense
  • Depreciate the vehicle over its effective life (typically 8 years for cars)
  • Balloon (residual) payments available to reduce monthly repayments and improve cash flow

Tax Benefits of a Chattel Mortgage

A chattel mortgage is one of the most tax-effective ways to finance a business vehicle in Australia. The three core tax benefits work together to significantly reduce the after-tax cost of the vehicle:

1. GST Input Tax Credit

If your business is registered for GST, you can claim the GST component of the vehicle purchase price as an input tax credit on your next BAS. On a $55,000 vehicle (inc. GST), the GST component is $5,000, which you claim back from the ATO. This effectively reduces your purchase price by 10% on day one.

Note: The luxury car tax (LCT) threshold limits the GST credit for vehicles above a certain value. For 2024-25, the threshold is $76,950 for standard vehicles and $91,387 for fuel-efficient vehicles.

2. Interest Deduction

All interest charges on the chattel mortgage are 100% tax-deductible as a business expense, provided the vehicle is used for business purposes. On a $50,000 loan at 6.49% over 5 years, total interest is approximately $8,700, all of which reduces your taxable business income.

3. Depreciation

You can claim depreciation on the vehicle over its effective life. The ATO has set the effective life for cars at 8 years, but small businesses may be eligible for instant asset write-off provisions (check current thresholds). This depreciation expense further reduces taxable income each year.

Tax Benefit Example: $55,000 Ute (inc. GST)
  • GST credit: $5,000 claimed on next BAS
  • Interest deduction (over 5 years): $8,700 off taxable income
  • Depreciation (over 8 years): $50,000 off taxable income
  • Estimated total tax savings: $19,000-$25,000 (depending on tax rate)

Example is illustrative only. Consult your accountant for advice specific to your business.

Chattel Mortgage vs Other Business Finance Options

FeatureChattel MortgageFinance LeaseNovated Lease
OwnershipYou (from day 1)Lender (until end)Lender (until end)
GST on PurchaseClaim upfrontClaim on each rentalIncluded in packaging
Interest DeductibleYesEntire rental deductiblePre-tax salary sacrifice
Depreciation ClaimYesNo (not owner)No (not owner)
Best ForABN holders / businessesBusinesses wanting off-balance sheetEmployees (salary packaging)

Eligibility Requirements

  • Active ABN (sole trader, partnership, company, or trust)
  • Vehicle must be used primarily for business purposes
  • GST registration (required for GST input tax credit)
  • Standard credit assessment on business and director(s)
  • Full doc or low doc options available depending on ABN age

The Chattel Mortgage Process

1
Business Assessment
Provide ABN, business details, and income docs. We assess your borrowing capacity.
2
Lender Comparison
We compare chattel mortgage rates from 50+ lenders to find your best deal.
3
Approval & Structure
Formal approval with optimal balloon structure for your cash flow needs.
4
Settlement & GST Claim
Vehicle settled, GST input credit claimable on your next BAS. Start driving and deducting.
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Related Business Finance

Novated Lease
Salary packaging for employees
Business Car Loans
All business vehicle options
Low Doc Car Loans
Self-employed finance
Ute Finance
Work ute finance
Truck Loans
Commercial truck finance

WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees, or other loan amounts might result in a different comparison rate. Comparison rates are based on a secured loan of $30,000 over 5 years for vehicle finance and $50,000 over 5 years for equipment finance, as required under the National Credit Code.

Chattel Mortgage FAQs

What is a chattel mortgage?
A chattel mortgage is a business finance arrangement where a lender provides funds to purchase a vehicle (the "chattel"), and the vehicle is used as security (the "mortgage"). Unlike a lease, you own the vehicle from day one. The lender holds a mortgage over the vehicle until the loan is repaid in full. Chattel mortgages are only available for business use and require an ABN.
What are the tax benefits of a chattel mortgage?
Chattel mortgages offer three main tax advantages for GST-registered businesses: (1) claim the GST on the purchase price as an input tax credit in your next BAS, (2) claim the interest charged on the loan as a tax-deductible business expense, and (3) claim depreciation on the vehicle over its effective life. These benefits can significantly reduce the after-tax cost of the vehicle.
What is the difference between a chattel mortgage and a car loan?
A standard car loan is a consumer finance product available to anyone. A chattel mortgage is a commercial finance product only available to ABN holders for business-use vehicles. The key advantage of a chattel mortgage is the ability to claim GST upfront, deduct interest, and depreciate the vehicle, benefits not available with a standard consumer car loan.
Can I have a balloon payment with a chattel mortgage?
Yes, chattel mortgages commonly include a balloon (residual) payment at the end of the term. This reduces monthly repayments during the loan, improving business cash flow. Typical balloons range from 10% to 40% of the purchase price. At the end of the term, you can pay the balloon, refinance it, or trade in the vehicle.
Do I need to be GST registered for a chattel mortgage?
You need an ABN for a chattel mortgage, but GST registration is not strictly required. However, the GST input tax credit, one of the biggest tax benefits, is only available to GST-registered businesses. If you are not GST registered, you can still access the interest deduction and depreciation benefits.
Is a chattel mortgage or novated lease better?
It depends on your situation. A chattel mortgage suits business owners and ABN holders who want to own the vehicle, claim GST upfront, and deduct interest and depreciation. A novated lease suits employees who want to salary package a car through their employer and benefit from FBT savings (especially for EVs). Our brokers can model both options for you.
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Tax-effective business vehicle finance Claim GST, deduct interest, and depreciate.

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