What Is a Chattel Mortgage?
A chattel mortgage is a loan secured against a movable asset (called a "chattel"). The lender provides funds to purchase the asset, and the borrower takes ownership from day one. The lender holds a mortgage over the asset until the loan is repaid.
The borrower owns the asset from settlement while the lender registers security over it. This page follows that arrangement through its lifecycle. For suitability and alternatives, use the chattel mortgage pros and cons checklist.
Also Known As: Commercial Goods Loan
Some lenders use names such as "commercial goods loan" or "business loan — goods" for a similar ownership-and-security arrangement. Product names are not conclusive: read the contract for ownership, security, fees, GST treatment and end-of-term obligations.
How a Chattel Mortgage Works: Seven Stages
- Obtain the asset quote — identify the asset, seller, price, GST status, serial or VIN details and any deposit or trade-in.
- Structure the request — choose the proposed amount, term, repayment frequency and balloon, then compare the total amount payable and fees.
- Complete lender assessment — provide identity, business and financial evidence required for that transaction. A quote or indicative screen is not an approval.
- Review and sign documents — check the interest rate, fees, repayment schedule, balloon, security, guarantees, default terms and early-payout method.
- Settle the purchase — the lender pays the approved seller, the borrower takes title, and the lender records its security interest, commonly on the PPSR.
- Make repayments and manage the asset — keep insurance and records, maintain the asset and obtain a lender payout before any proposed sale.
- Pay the balloon or final balance — once every secured amount is paid, obtain confirmation that the lender's security has been discharged.
Documents That Commonly Move the File Forward
| Stage | Useful documents or data | Common hold-up |
|---|---|---|
| Quote | Seller quote, asset identifiers, price and GST breakdown | Incomplete asset or private-seller information |
| Assessment | ID, ABN/ACN, bank statements, BAS, financials or tax returns where requested | Evidence does not match the applicant entity |
| Settlement | Signed contract, insurance, invoice and verified seller bank details | Invoice, ownership or bank-detail discrepancies |
| Payout | Lender payout letter and proposed sale or refinance details | Assuming the online balance is the final payout figure |
Ownership & GST
This is the key difference from leases: you own the asset from day one. That means:
- The asset appears on your balance sheet
- you may be able to claim a purchase-related GST credit to the extent allowed (if registered for GST and the acquisition is creditable)
- You control the asset subject to the lender's security and contract restrictions; obtain a payout before selling
GST Example
A $110,000 tax invoice may include $10,000 GST. A fully creditable business acquisition could support a credit of up to $10,000, but business-use apportionment, invoice requirements, vehicle limits and other rules can reduce or defer the claim.
Records to Keep for GST and Income Tax
The finance contract does not create a tax entitlement by itself. Keep the purchase invoice, settlement statement, repayment schedule, interest breakdown and business-use records for your registered tax adviser.
1. Interest Deductions
The business-use portion of interest may be deductible. Principal is not interest, and private use may require apportionment.
2. Depreciation
Because you own the asset, you can claim depreciation on it. The ATO allows various methods:
- Prime cost (straight line) — equal deductions each year
- Diminishing value — larger deductions in earlier years
- Instant asset write-off — only if an enacted threshold and all entity, asset and timing conditions are satisfied
3. GST Credits
A GST-registered business may claim the creditable portion in the relevant BAS period when the normal requirements are met. See the specialist chattel mortgage GST guide for limits and examples.
Balloon & Residual Payments
With a chattel mortgage, you can set a balloon payment (larger final payment) to reduce your monthly repayments. For example:
| Scenario | Monthly Repayment | Balloon at End |
|---|---|---|
| $100K, 5yr, 7%, no balloon | $1,980 | $0 |
| $100K, 5yr, 7%, 30% balloon | $1,533 | $30,000 |
A chattel-mortgage balloon is not the same as a finance-lease residual. Availability and amount depend on the asset, term, approval and written contract. Treat calculator inputs as illustrations, not an entitlement.
What Lenders Check Before Settlement
- Applicant: entity identity, ABN/ACN, trading history, credit conduct and existing commitments
- Cash flow: evidence that the proposed repayments and balloon are supportable
- Asset: type, age, condition, value, seller and resale market
- Structure: deposit or trade-in, term, rate, balloon and guarantees
- Documents: the lender-specific full-doc or streamlined evidence pathway
Operational Checkpoints During the Loan
| Event | What to do |
|---|---|
| Change payment account | Update the lender before the next due date and retain confirmation |
| Insurance change or asset damage | Check the contract and notify the insurer and lender where required |
| Proposed asset sale | Request a dated payout figure; do not sell with the security unresolved |
| Refinance | Compare payout cost, new fees, remaining term and total amount payable |
| Final or balloon payment | Confirm cleared funds and obtain evidence of security discharge |
Use the Right Next Page
This article covers mechanics. Continue with the page that matches your next question:
Frequently Asked Questions
Sole traders can apply for business-purpose chattel mortgage finance. Lenders assess the asset, seller, business history, cash flow, credit profile, contribution and supporting evidence.
You can sell the asset, but you'll need to repay the outstanding loan balance first (called "payout"). The lender will provide a payout figure that includes any early termination fees.
Both new and used assets may be considered. Maximum age, condition, kilometres or hours, valuation, private-sale checks and age-at-end-of-term rules vary by lender and asset class.
The labels are often used for similar secured business-asset loans, but the contract controls. Confirm ownership, security, fees, GST treatment, tax consequences and end-of-term obligations.
Estimate Your Chattel Mortgage Repayments
Model scheduled repayments, total interest and the effect of different balloon settings.
Open Chattel Mortgage Calculator →Want the Complete 2026 Guide?
This article covers the transaction lifecycle. For ownership fit, evidence pathways, current tax-rule status and the application decision, use the main product guide.
Chattel Mortgage Australia Product Guide →