Chattel Mortgage
Chattel Mortgage
A Chattel Mortgage is a commercial finance product where the customer takes ownership of the asset (chattel) at the time of purchase.
Under a Chattel Mortgage the financier advances funds to the customer to purchase an asset, and the customer takes ownership of the asset (chattel) at the time of purchase.
The financier then takes a “mortgage” over the asset as security for the loan, by registering a Fixed and Floating Charge with ASIC.
Once the contract is completed, the charge is removed giving the customer clear title to the vehicle.
- Flexible contract terms ranging from 24 to 60 months (two to five years)
- A residual value (balloon or final instalment) can be applied to the contract enabling the monthly repayments to be tailored to a budget
- Fixed interest rates
- Monthly repayments are fixed
- Costs are known in advance
- Deposit (either cash or trade-in) may be used
- A tax deduction is available when the asset is used for business purposes
- A customer who is registered for GST can claim the GST contained in the asset price as an input credit on their next Business Activity Statement (BAS)
- No GST is charged on the monthly repayment or the contract balloon amount
- The finance is secured against the asset, allowing lower interest rates
A Chattel Mortgage is suitable for those companies, partnerships and sole traders who use the cash method of accounting (they record business income and expenses as and when they occur) as it allows them to claim the GST in the asset price up-front.
GST is charged in the purchase price of the asset but not the monthly rental or the contract balloon (final installment).
Where the customer is registered for GST, they can claim some or all of the GST contained in the asset price as soon as they lodge their next BAS, rather than over the term of the loan.
Under a Chattel Mortgage the customer can claim the interest charges on the contract and depreciation (in the case of vehicles up to the depreciation limit*) as a tax deduction.