A chattel mortgage hands you the keys — and the ownership — from day one.
Unlike a lease, a chattel mortgage means your business owns the vehicle or equipment from settlement, while the lender simply holds a security interest over it. That ownership is the whole point: it's what lets an eligible business claim the GST input credit up front and depreciation across the term. Here's exactly how the money and the tax events flow, day one to payout.
Own it on day one, claim as you go, decide at the end.
A chattel mortgage runs on a simple arc of ownership and cash events. You buy and own the asset at settlement, the tax positions build across the term, and an optional balloon lets you shape the repayments to your cash flow. The tax notes below each stage are general information only — always confirm your position with your accountant.
You own the asset
The lender advances the funds, your business buys and owns the vehicle or equipment outright, and the lender registers a security interest — the "mortgage" over the chattel. The asset goes on your balance sheet.
Tax: an eligible GST-registered business can generally claim the GST input credit on the purchase price up front, in the next BAS. General information, not tax or financial advice — confirm with your accountant.
Claim depreciation + interest
You make regular repayments over the term. Because you own the asset, you can depreciate it (or apply the instant asset write-off if eligible) and deduct the interest portion of each repayment — to the extent of business use.
Tax: depreciation and interest deductibility depend on eligibility and your business-use proportion. General information, not tax or financial advice — confirm with your accountant.
Settle the balloon
If you set an optional balloon (residual) at the start, your repayments through the term were lower — and at the end you pay out or refinance that final lump sum. With no balloon, the loan simply reaches zero.
Tax & cash flow: a balloon lowers periodic repayments but leaves more owing at term end. Structure it to your cash flow. General information, not tax or financial advice.
Free and clear
Once the loan and any balloon are paid, the lender's security interest is discharged and you hold the asset free and clear — keep it, sell it, or trade it toward the next one.
Tax: a later sale may trigger a balancing adjustment or GST on the sale. General information, not tax or financial advice — confirm with your accountant.
Illustrative lifecycle only. A chattel mortgage is a business-purpose product for ABN holders; specific GST, depreciation and instant-asset-write-off outcomes depend on your turnover, the asset, your business-use proportion and current ATO rules. This is general information, not tax or financial advice — confirm your position with your accountant or registered tax agent. Not an offer of credit.
Three advantages that come from owning the asset.
The features below flow directly from the fact that you — not a financier — own the chattel from settlement.
GST claimed up front
Because you own the asset from day one, an eligible GST-registered business can generally claim the GST input credit on the purchase price in the next BAS — rather than piecemeal on each rental as you would under a lease. General information, not tax advice.
Depreciation + interest
You depreciate the asset (15% in year one, then 30% diminishing value under the small-business pool) or apply the instant asset write-off if eligible, and deduct the interest portion of repayments — all to the extent of business use. General information, not tax advice.
Balloon flexibility
Set an optional balloon (residual) to lower your periodic repayments and match them to your cash flow, then pay out or refinance the balloon at term end. Terms typically run 1–7 years, most commonly 3–5.
The ownership tax picture — general information, not advice.
Read this before you rely on any figure above. These are general-information figures about GST, depreciation and the instant asset write-off — they are not tax or financial advice. Whether, and how much, your business can claim depends on your aggregated turnover, the asset, your business-use proportion, the timing of first use/installation and current ATO rules. The $20,000 instant asset write-off applies for FY2024-25 and FY2025-26; as currently legislated it reverts to $1,000 from 1 July 2026 (a proposal to make $20,000 permanent has been announced but is not yet law). Always confirm your position with your accountant or a registered tax agent. Sources: ATO (instant asset write-off, small business pool, car thresholds, GST on hire purchase and leasing); RBA (cash rate target), as at July 2026.
Chattel mortgage vs lease vs hire purchase vs novated lease.
Two questions decide which structure fits: who owns the asset, and when do you claim the GST? Here's how the four common options line up.
| Attribute | Chattel mortgage | Finance lease | Hire purchase | Novated lease |
|---|---|---|---|---|
| Who owns it during the term | Business owns it from settlement; lender holds a security interest | Financier owns it; business leases/uses it | Financier owns it; business hires it | Leasing company owns it; employee uses it |
| Who it's for | Businesses (ABN) buying a business-use asset | Businesses wanting use without ownership | Businesses wanting ownership at term end | Salaried employees packaging a car via their employer |
| GST input credit timing | On the asset price, generally up front in the next BAS; interest has no GST | On each lease rental as paid | Agreements from 1 Jul 2012: generally up front | Handled by the leasing company; no GST on running costs |
| Income tax deductions | Depreciate the asset (or IAWO if eligible) + deduct interest | Deduct the lease rentals (business-use portion) | Depreciate the asset + deduct interest/charges | Pre-tax salary reduces taxable income; FBT rules apply |
| Balloon / residual at end | Optional balloon to lower repayments; you pay/refinance it | Residual set at start (ATO minimums); a real cost to plan for | Optional balloon; on final payment the asset is yours | Residual payable to take ownership at lease end |
| At the end | You already own it; security discharged (pay any balloon) | Pay residual to own, re-lease, or return | Title transfers to the business after the final payment | Pay residual to keep, re-lease, or return the car |
Scroll the table sideways to see every column. Structural attributes per ATO GST and depreciation guidance and standard Australian asset-finance product definitions (as at July 2026). General information about product structures, not tax, financial or credit advice — the right structure depends on your business, and specific GST/tax outcomes should be confirmed with your accountant.
Who a chattel mortgage suits — and what you can finance.
ABN holders, business-use assets
Chattel mortgages are for businesses — sole traders, partnerships, companies and trusts with an active ABN. The financed asset generally needs to be used predominantly (typically 51%+) for business to support the associated tax treatment.
Vehicles, plant and equipment
Cars, utes, vans, trucks and trailers, plus plant, machinery, tools and business equipment. Utes and trucks rated one tonne or more of payload are generally exempt from the car depreciation limit that caps passenger cars.
Full-doc or low-doc
Established ABN holders can often access low-doc chattel mortgages on the strength of trading history and the asset, without full financials. We'll tell you which lenders on the panel suit your paperwork.
Indicative, and they move
Secured chattel-mortgage rates for prime business borrowers currently sit in an indicative range of roughly 6.5% to 10%+ p.a. — used or specialised assets and weaker credit price higher. Rates move with the RBA cash rate. A fixed rate locks the cost for the term. Where we quote an example rate for a regulated consumer loan we'll show its comparison rate; a comparison rate includes most fees and can be higher than the interest rate.
Business finance, arranged the right way
A chattel mortgage is a business-purpose product. We arrange business and commercial asset finance through Esteb Capital; consumer credit sits under Esteb & Co (Credit Rep #574071). Much business-use asset finance is not regulated under the National Consumer Credit Protection Act — we'll tell you which framework applies to your deal.
This page is general information only, not personal credit, tax or financial advice. Tax outcomes depend on your circumstances and current ATO rules — confirm with your accountant or registered tax agent. Any rates or figures are indicative and not an offer of credit or a guarantee of approval or a particular rate.
Chattel mortgage, answered straight.
What is a chattel mortgage and how does it work?
A chattel mortgage is a business finance arrangement where the lender advances funds to buy a vehicle or equipment (the "chattel"), your business owns the asset from settlement, and the lender registers a security interest over it until the loan is repaid. You make regular repayments over a set term, and at the end — once any balloon is paid — the security is discharged and you hold the asset free and clear.
Who can get a chattel mortgage?
Chattel mortgages are for businesses with an active ABN — sole traders, partnerships, companies and trusts. The financed asset generally needs to be used predominantly (typically at least 51%) for business purposes for the associated tax treatment to apply. It isn't a consumer product; individuals financing a private-use car would usually look at a car loan instead.
What are the tax benefits — GST, depreciation and the instant asset write-off?
Because you own the asset, an eligible GST-registered business can generally claim the GST input credit on the purchase price up front in the next BAS, then depreciate the asset (or apply the instant asset write-off if eligible) and deduct the interest portion of repayments, all to the extent of business use. For FY2025-26 the instant asset write-off is $20,000 per asset for eligible small businesses (aggregated turnover under $10m), where the asset is first used or installed ready for use by 30 June 2026. This is general information, not tax or financial advice — confirm your position with your accountant.
How is a chattel mortgage different from a finance lease or hire purchase?
The core difference is ownership and GST timing. Under a chattel mortgage you own the asset from settlement and generally claim the GST on the price up front. Under a finance lease the financier owns the asset and you claim GST on each rental as paid. Hire purchase sits in between — the financier owns it during the term and title transfers to you after the final payment, with GST generally claimable up front for agreements from 1 July 2012.
Chattel mortgage vs novated lease — which should I choose?
They suit different people. A novated lease is a salary-packaging arrangement between an employee, their employer and a leasing company (which owns the car), generally limited to passenger vehicles. A chattel mortgage is for the business itself, has no passenger-payload restriction beyond business use, and the business owns the asset from day one. If it's an employee benefit, a novated lease may fit; if it's a business asset, a chattel mortgage usually does. Confirm the tax treatment for your situation with your accountant.
What is a balloon payment?
A balloon (or residual) is an optional lump sum deferred to the end of the term. Setting one lowers your periodic repayments through the term, but leaves a larger amount owing at the end, which you pay out or refinance. It's a cash-flow tool — we help you set a balloon that matches how the asset earns for your business.
What can I finance and how long are the terms?
Cars, utes, vans, trucks and trailers, plus plant, machinery, tools and business equipment. Terms typically run from 1 to 7 years (12–84 months), most commonly 3–5 years, usually matched to the working life of the asset. Utes and trucks rated one tonne or more of payload are generally exempt from the car depreciation limit that caps passenger cars.
Are the rates fixed, and is a chattel mortgage regulated like a home loan?
Chattel mortgages are commonly offered at a fixed rate, which locks the cost for the term; rates move with the RBA cash rate and are confirmed in writing for your deal. Because it's a business-purpose product, much chattel-mortgage lending sits outside the National Consumer Credit Protection Act that governs consumer home loans. Where a regulated consumer loan is involved we show the comparison rate, which includes most fees and can be higher than the interest rate.
Financing a business vehicle or equipment?
Tell us the asset, your ABN and how you'll use it — we'll compare chattel mortgage against lease and hire purchase across the panel, model the balloon, and structure it around your cash flow. No obligation to proceed.
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