Chattel Mortgage Australia: A Complete Guide to Tax-Effective Business Vehicle Finance

A chattel mortgage is a secured business loan where you purchase a vehicle or equipment and own it from day one, while the lender holds security over the asset until repayment. In Australia, chattel mortgage rates typically range from 7-12% p.a. depending on business profile and asset type, with loan amounts from $5,000 to $500,000+ over terms commonly between 1-7 years. Potential tax benefits include GST input tax credits (up to $6,334 for passenger vehicles in 2025-26), interest deductions, and depreciation claims. Most lenders require 51%+ business use, an ABN, and GST registration.

You need a $75,000 ute for your business but you want to maximise tax deductions while preserving working capital. A chattel mortgage could be the answer, but understanding how it works, what it costs, and how to structure it properly makes all the difference to your bottom line.

According to Money.com.au data from 2025, almost 78% of chattel mortgages in Australia are for vehicle purchases, with the average chattel mortgage for vehicles sitting at $71,430. For businesses financing machinery and equipment, the average is significantly higher at $157,728. This makes it one of the most popular forms of asset finance for Australian small business owners.

What Is a Chattel Mortgage

A chattel mortgage is a type of secured business finance where you purchase a vehicle or equipment and take immediate ownership, while the lender holds a mortgage (security interest) over the asset until the loan is fully repaid. “Chattel” simply refers to movable personal property, in this case, your business vehicle or equipment.

Unlike a lease where the finance company owns the asset, with a chattel mortgage you own it from day one. This ownership structure unlocks significant potential tax advantages that make chattel mortgages particularly attractive for Australian businesses.

Key characteristics:

• Immediate ownership: You own the asset outright from purchase, meaning it appears as both an asset and a liability on your business balance sheet.
• Asset as security: The vehicle or equipment serves as collateral for the loan. The lender registers their interest on the Personal Property Securities Register (PPSR) until the loan is repaid.
• Business use requirement: To qualify for a chattel mortgage and associated tax benefits, the asset must be used for business purposes at least 51% of the time.
• Fixed repayments: Most chattel mortgages have fixed interest rates and fixed monthly repayments, providing certainty for cash flow planning.
• Tax advantages: Potential to claim GST credits upfront, deduct interest payments, and claim depreciation on the asset (subject to individual circumstances and ATO rules).
• Also known as: Chattel mortgages are sometimes called goods loans, business car loans, ABN car loans, or equipment loans, depending on the lender.

How Chattel Mortgages Work

Understanding the chattel mortgage structure helps you see why it’s such a popular choice for Australian business owners financing vehicles and equipment.

The Basic Structure

1. Asset purchase: You identify the vehicle or equipment you need for your business and obtain a quote from the supplier, including GST.
2. Finance arrangement: The lender provides funds equal to the purchase price (minus any deposit). You can often finance 100% of the purchase price.
3. Immediate ownership: You take ownership of the asset immediately and can start using it in your business right away.
4. Security registration: The lender registers their security interest on the PPSR, protecting their position until you repay the loan.
5. Repayment period: You make regular fixed repayments (principal plus interest) over the agreed term, typically 1-7 years.
6. Ownership free and clear: Once you make your final payment, the lender removes the security registration and you own the asset outright.

Balloon Payment Option

Many chattel mortgages offer a balloon payment (also called a residual value), which is a larger lump sum payment due at the end of the loan term. This lowers your monthly repayments throughout the term, improving cash flow. At the end of the term, you can pay the balloon, refinance it, or sell the asset to cover it.

GST Treatment

One of the most attractive features is the GST treatment. If your business is registered for GST, you can claim the GST input tax credit on your next Business Activity Statement (BAS) after purchasing the asset.

• Important limitation: For passenger vehicles, the GST credit is capped at 1/11th of the ATO’s car depreciation limit. For 2025-26, the car limit is $69,674, meaning the maximum GST credit is $6,334. This doesn’t apply to commercial vehicles like utes, vans, and trucks.

Chattel Mortgage Rates & Costs

Understanding the true cost requires looking at interest rates, fees, and the total amount you’ll repay.

Interest Rates in 2025

Chattel mortgage rates in Australia typically range from 7-12% p.a. as of September 2025, though your actual rate depends on multiple factors.

Factors Affecting Your Rate

• Business strength: Established businesses (2+ years) with consistent revenue access lower rates.
• Asset age and type: New and demo vehicles attract the lowest rates.
• Deposit contribution: A 10-20% deposit may reduce your rate.
• Loan term: Shorter terms may attract slightly better rates.
• Credit history: Directors’ credit scores impact pricing.
• Business revenue: Strong, consistent revenue demonstrates capacity to service the loan.
• Balloon payment: Including a balloon can sometimes result in a slightly higher rate.

Fees and Charges

• Establishment fee: Commonly $300-$995.
• Monthly account fee: Often $10-$25 per month.
• PPSR registration fee: Usually $6-$8.
• Valuation fee: $150-$400 if required for a used asset.
• Early termination fee: Can be substantial on fixed-rate agreements.
• Late payment fee: Commonly $25-$50.

Real Cost Example

Tax Benefits & Deductions

The tax benefits are a primary reason businesses choose this structure.

GST Input Tax Credit

If your business is GST-registered, you may claim the GST component of the purchase price on your next BAS. For a $77,000 ute (including $7,000 GST), you can claim the full $7,000 credit, subject to business use. For passenger vehicles, this is capped at $6,334 for 2025-26.

Interest Deductions

The interest component of your repayments may be tax deductible. If your interest payment is $450 for the month, you could potentially claim that full amount, saving $112.50 at a 25% company tax rate.

Depreciation Deductions

Since you own the asset, you may claim depreciation. For a $60,000 vehicle with an 8-year effective life, you could claim $7,500 annually using the prime cost method, a potential tax saving of $1,875 per year. You may also be able to use the Instant Asset Write-Off for eligible assets.

Chattel Mortgage vs Alternatives

Here’s how a chattel mortgage compares to other popular forms of asset finance.

When Each Option Makes Sense

• Choose chattel mortgage when: You want immediate ownership and maximum tax benefits.
• Consider finance lease when: You prefer off-balance-sheet financing and upgrade equipment frequently. For a direct comparison, see our Chattel Mortgage vs. Finance Lease guide.
• Consider hire purchase when: You want eventual ownership and a simpler structure, and you aren’t registered for GST.
• Consider cash purchase when: You have surplus cash and want to avoid interest costs entirely.

Qualification Guidelines

• Essential Requirements: You must have a valid ABN, be registered for GST, and use the asset for at least 51% business purposes.
• Business Trading History: Lenders prefer 2+ years of trading, but many specialists consider businesses with 12-24 months history. Options exist for newer businesses.
• Credit Score Considerations: A score above 650 (Equifax) typically accesses prime rates, but lenders assess overall business health, not just the score. Options are available for various credit situations.
• Asset Requirements: New and near-new assets from licensed dealers are preferred, but financing is widely available for used assets up to 12-15 years old and from private sellers.

Traditional vs Streamlined Process

The application process has evolved. Traditional methods involved lengthy paperwork and week-long waits. Modern platforms like Loan Phone use technology for a more efficient experience.

• Fast online comparison: See personalised options from multiple lenders in minutes.
• Efficient matching: Technology identifies lenders suited to your profile and asset.
• Digital process: Secure document uploads and e-signatures speed things up.
• Specialist support: Experienced brokers are available for guidance and complex scenarios.

This streamlined approach allows you to get approved much quicker than traditional broker or direct bank options.

Application Process

1. Online Comparison: Complete a quick form with business and asset details to see matched options.
2. Choose Your Lender: Select the preferred option and proceed with the application.
3. Document Submission: Provide documents like bank statements, ID, and the asset invoice.
4. Assessment & Approval: The lender assesses your application and issues a formal approval.
5. Settlement: Sign documents (often electronically), and the lender pays the supplier. You take possession of your asset.

Common Questions

What’s the difference between a chattel mortgage and a car loan? A chattel mortgage is a business finance product for assets used 51%+ for business, requiring an ABN and offering tax benefits. A standard car loan is consumer finance for personal use with no business tax advantages.

Can I claim 100% of a chattel mortgage on tax? You can only claim the business-use portion. If a vehicle is used 75% for business, you can claim 75% of the GST credit, interest, and depreciation.

How quickly can I get a chattel mortgage approved? Timelines vary. With our streamlined system, you can see options instantly. Full approval can range from the same day to several days, depending on the lender and application complexity.

What credit score do I need for a chattel mortgage? There’s no single minimum score. Lenders assess overall business health. Options are available for a wide range of credit profiles.

Can I get a chattel mortgage for a used vehicle? Yes, most lenders finance used vehicles up to 12-15 years old. Rates may be slightly higher, and a valuation may be required.

What happens at the end of a chattel mortgage term? If there’s no balloon, you own the asset outright. If there is a balloon, you can pay it, refinance it, or sell the asset to cover the amount.

Can I pay out a chattel mortgage early? Generally yes, but early termination fees often apply on fixed-rate loans. These can be substantial, so check your contract.

Do I need a deposit for a chattel mortgage? No-deposit finance is available for many applicants, particularly established businesses buying new assets. A deposit of 10-20% may be required for newer businesses or older assets and can help secure a better interest rate.

Get a Chattel Mortgage for Your Business

Ready to explore chattel mortgage options for your business vehicle or equipment? Loan Phone combines streamlined online comparison with specialist broker expertise to help Australian businesses access tax-effective chattel mortgage solutions.

Related Resources

Last updated: October 3, 2025