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Chattel Mortgage

A Chattel Mortgage is an attractive finance option if you use the 'cash' method of accounting for the Goods and Services Tax (GST). Under the cash method, the GST component of the purchase price can be claimed back on the next Business Activity Statement rather than claiming the GST over the term of the finance contract.

You can choose to finance the total purchase price or use a deposit or trade-in to reduce the loan amount and monthly repayments. You can even structure the finance to pay back the GST component several months into the loan agreement.

This reduces the outstanding loan and the total interest you will pay over the term of the loan. By choosing a Chattel Mortgage, you become owner of the asset while the financier secures a charge over the asset.

As you are the owner of the asset you can claim a tax deduction for the depreciation as well as the interest component of the repayments. Other benefits of a Chattel Mortgage include:

  • The repayments are fixed over the term of the loan that ranges from 12 to 60 months
  • You can structure the repayments with or without a balloon payment at the end of the loan term to suit your cash flow
  • There is no GST payable on the balloon payment (if any) at the end of the contract