What Is a Chattel Mortgage?
A chattel mortgage is the most common way Australian businesses finance vehicles, trucks, equipment, and machinery. The word chattel is a legal term for a movable asset — as opposed to real property (land and buildings). The word mortgage describes the security: the lender holds a registered charge over the asset until you repay the loan in full.
In practice, it works like this: you choose the asset, the lender funds the purchase at settlement, and you own the asset immediately — registered in your name from day one. You make fixed monthly repayments over an agreed term (typically 2–7 years), and once the loan is fully repaid, the mortgage is discharged and you own the asset outright.
📌 Also Known As: Commercial Goods Loan
Major banks (CBA, NAB, Westpac, ANZ) now market this product as a "commercial goods loan" or "business loan – goods". The name has changed; the product is identical. Ownership from day one, upfront GST credit, interest and depreciation deductions — all the same rules apply.
Why Is It the Most Popular Structure?
Chattel mortgages dominate because they deliver the best combination of tax benefits for most GST-registered businesses:
- Immediate ownership — you can modify, brand, or sell the asset as you choose
- Full GST credit upfront — reclaim the entire 10% GST in your next BAS, not spread over repayments
- Interest deductions — every dollar of interest paid is a business tax deduction
- Depreciation deductions — claim ATO depreciation (including the $20K instant write-off for eligible assets)
- No ATO-mandated residual — you choose your balloon, from zero to ~50%
How a Chattel Mortgage Works — Step by Step
- Choose your asset — new or used vehicle, truck, equipment, or machinery
- Get a quote — use our chattel mortgage calculator for an instant repayment estimate, then submit to a broker
- Broker searches 30+ lenders — free service, comparing rates and conditions on your behalf
- Approval — conditional approval same day for strong applications; full approval within 1–3 business days
- Settlement — the lender pays the seller; you take ownership immediately
- Repayments begin — fixed monthly payments over 2–7 years
- Claim your GST credit — the full input tax credit goes on your next BAS
- Claim depreciation in your tax return — interest deductions monthly; depreciation annually
- End of term — pay any balloon amount, mortgage is discharged; asset is yours debt-free
🔄 What Happens If I Want to Sell Before the Loan Ends?
You can sell the asset at any time and use the proceeds to pay out the loan balance. The lender will provide a payout figure that includes any early termination fees. Because you own the asset, you pocket any equity (sale price minus payout amount).
Tax Benefits of a Chattel Mortgage
This is where chattel mortgages genuinely shine. There are three tax mechanisms working simultaneously in your favour:
1. GST Input Tax Credit (Upfront)
As the owner of the asset, your business can claim the full 10% GST on the purchase price in the next BAS quarter after settlement. This is a cash benefit — you receive it as a direct credit against your GST liability.
| Asset Price (incl. GST) | GST Credit Claimable | Effective Net Cost |
|---|---|---|
| $55,000 | $5,000 | $50,000 |
| $110,000 | $10,000 | $100,000 |
| $275,000 | $25,000 | $250,000 |
The GST credit is claimable even though the lender funded the purchase. Ownership — not who paid for it — determines who claims the input tax credit.
2. Interest Deductions (Ongoing)
The interest component of every repayment is fully deductible as a business expense. Principal repayments are not deductible (they reduce the outstanding debt, not create a new expense), but the interest portion is. Over a typical 5-year loan, the interest deduction can be substantial:
| Loan Amount | Rate | Term | Total Interest | Tax Saving @ 25% | Tax Saving @ 30% |
|---|---|---|---|---|---|
| $50,000 | 7.5% | 5 yrs | $10,455 | $2,614 | $3,137 |
| $100,000 | 7.5% | 5 yrs | $20,910 | $5,228 | $6,273 |
| $250,000 | 7.0% | 7 yrs | $63,840 | $15,960 | $19,152 |
3. Depreciation (Annual)
Because you own the asset, you — not the lender — claim depreciation. The ATO allows three methods for business assets:
| Method | How It Works | Best For |
|---|---|---|
| Instant Asset Write-Off (up to $20K) | Deduct the full asset cost in Year 1 | Assets ≤$20K (ex-GST), turnover <$10M |
| SBE Depreciation Pool | 15% Year 1, then 30% DV p.a. for assets >$20K | Most small business assets over $20K |
| Diminishing Value (DV) | Higher deductions in early years | General businesses not in SBE pool |
| Prime Cost (Straight Line) | Equal annual deductions over the asset life | Assets with consistent value decline |
📅 $20,000 Instant Asset Write-Off — Permanently Legislated from 2026-27
From the 2026–27 financial year, the instant asset write-off threshold is permanently set at $20,000 (ex-GST) for businesses with turnover under $10 million. This means any eligible asset bought via chattel mortgage for $20,000 or less can be fully deducted in the year of purchase — no time limits, no uncertainty.
Assets over $20,000 are allocated to the SBE pool: 15% deduction in Year 1, then 30% diminishing value each year thereafter. Full guide to the permanent instant write-off →
Year 1 Tax Saving — Real Example
Here’s a worked example for a $75,000 (incl. GST) ute purchased via chattel mortgage on 1 July 2026 by a company with a 25% tax rate and the 5-year loan at 7.5%:
| Item | Amount |
|---|---|
| Purchase price (incl. GST) | $75,000 |
| GST credit (BAS claim) | + $6,818 |
| Year 1 interest (7.5%, month 1–12) | $5,085 |
| Year 1 depreciation (SBE pool: 15% of $68,182 ex-GST) | $10,227 |
| Total Year 1 deductions | $15,312 |
| Tax saving @ 25% | + $3,828 |
| Total Year 1 benefit | $10,646 |
*This is a general illustration only. Consult your accountant for your specific situation.
Use the chattel mortgage calculator to model your own asset, tax rate, and term.
Calculate Your Chattel Mortgage Tax Savings
Enter your asset price, tax rate, and loan term. Instantly see GST credit, interest deductions, depreciation and your effective out-of-pocket cost.
Chattel Mortgage Interest Rates 2026
Updated May 2026 • Indicative rates only — subject to lender approval, credit profile, asset age, and loan-to-value ratio.
| Asset Type | Asset Age | Indicative Rate Range p.a. |
|---|---|---|
| New vehicles / cars | New | 6.29% – 9.49% |
| Used vehicles / cars | Up to 7 yrs | 7.49% – 11.49% |
| Trucks & prime movers | New | 6.29% – 10.49% |
| Trucks & prime movers | Used | 7.49% – 13.49% |
| Business equipment & machinery | New | 6.99% – 11.49% |
| Business equipment & machinery | Used | 8.49% – 14.99% |
| Agricultural equipment | New or used | 6.99% – 12.49% |
| Medical & dental equipment | New | 6.49% – 9.99% |
What Determines Your Rate?
- Credit history — clean credit file = lowest rates; adverse history = higher rates or specialist lenders
- Time in business — 2+ years ABN qualifies for prime rates; under 2 years may require low-doc products
- Asset age & type — newer assets are lower risk; older, higher-mileage assets attract higher rates
- Loan amount — lenders offer better rates for larger loans in some tiers
- Deposit — a 10–20% deposit reduces the lender’s exposure and can improve your rate
- Loan-to-value ratio (LVR) — lower LVR = lower risk = lower rate
Balloon Payments on a Chattel Mortgage
A balloon payment is an optional lump sum due at the end of your loan term. Setting a balloon reduces your regular monthly repayments but requires you to pay a larger amount — or refinance — at the end.
Unlike a finance lease (which has ATO-mandated minimum residuals), a chattel mortgage balloon can be set at any level from 0% to ~50% of the purchase price. It is purely a cash-flow decision.
| Scenario | Balloon | Monthly Repayment | Total Interest |
|---|---|---|---|
| $100K, 5yr, 7.5%, no balloon | $0 | $2,001 | $20,060 |
| $100K, 5yr, 7.5%, 20% balloon | $20,000 | $1,707 | $22,420 |
| $100K, 5yr, 7.5%, 30% balloon | $30,000 | $1,558 | $23,480 |
| $100K, 5yr, 7.5%, 40% balloon | $40,000 | $1,408 | $24,480 |
A higher balloon lowers your monthly cost but increases total interest paid over the life of the loan.
How to Handle the Balloon at Term End
At the end of the term you have three options:
- Pay it out in cash — if the asset has retained value, this can be from sale proceeds or savings
- Refinance the balloon — roll it into a new loan (many fleet operators do this for ongoing vehicles)
- Trade-in or sell the asset — use the proceeds to clear the balloon and potentially fund the next asset
Who Is Eligible for a Chattel Mortgage?
Chattel mortgages are available to any business entity type in Australia as long as the asset will be used primarily for business purposes (more than 50% business use).
Entity Types
- ✓ Sole traders (ABN required)
- ✓ Partnerships
- ✓ Proprietary limited companies (Pty Ltd)
- ✓ Trusts (discretionary, unit, family)
- ✓ Incorporated associations and cooperatives
Standard Eligibility Criteria
| Criteria | Standard (Prime) | Low-Doc / Specialist |
|---|---|---|
| ABN tenure | 2+ years | 3+ months (higher deposit/rate) |
| Credit history | Clean (no defaults, low enquiries) | Impaired credit — specialist lenders available |
| Business income | Verified income supporting repayments | Accountant declaration or BAS history |
| Asset age at end of term | Up to 10–12 years | Up to 15 years (heavy equipment) |
| Minimum loan amount | $5,000 (most lenders) | $2,000 (some specialist lenders) |
| Maximum loan amount | $500,000–$2M+ (varies) | $150,000–$300,000 typical |
What Documents Do I Need?
- Full-doc: 2 years tax returns and financials, 6 months bank statements, driver’s licence, ABN/ACN details
- Low-doc: 12 months BAS, accountant’s declaration, driver’s licence — no full financials required
- Asset details: Dealer invoice or private sale agreement, registration details (for vehicles)
Chattel Mortgage vs Other Finance Structures
Choosing the right structure comes down to your GST registration, whether you want to own the asset, and your cash-flow priorities. Here’s how chattel mortgage stacks up:
| Feature | Chattel Mortgage | Finance Lease | Operating Lease | Hire Purchase |
|---|---|---|---|---|
| Asset ownership during term | Borrower | Lender | Lender | Lender (nominal) |
| GST claim timing | Upfront (full) | Over repayments | Over repayments | Upfront (full) |
| Interest deductible? | ✓ Yes | ✓ Yes (lease payments) | ✓ Yes (lease payments) | ✓ Yes |
| Depreciation claimable? | ✓ Yes (all methods) | ✓ Yes (finance lease) | ✕ No (lender claims it) | ✓ Yes |
| Balance sheet impact | Asset + liability on balance sheet | Asset + liability on balance sheet | Off balance sheet (typically) | Asset + liability on balance sheet |
| Instant write-off eligible? | ✓ Yes | ✓ Yes | ✕ No | ✓ Yes |
| Mandatory residual (ATO)? | ✕ No (balloon is optional) | ✓ Yes (ATO percentage tables) | ✓ Yes | ✕ No |
| Best for | GST-registered, ownership preference, depreciation claims | Businesses wanting ATO residual certainty | Off-balance-sheet, fleet management | Similar to chattel mortgage |
For an interactive side-by-side comparison, see Chattel Mortgage vs Finance Lease or use the full comparison calculator.
What Assets Can You Finance With a Chattel Mortgage?
Virtually any business asset used primarily for income-earning purposes. Common categories include:
🚚 Trucks & Prime Movers
Kenworth, Volvo, Scania, Freightliner
🚗 Utes & Vans
HiLux, Ranger, Amarok, LandCruiser
⛏ Excavators & Earthmoving
Mini, mid-range & full-size excavators
⚙ Equipment & Machinery
Workshop, manufacturing, printing
🌾 Tractors & Agri Equipment
John Deere, Case IH, New Holland
🔢 Forklifts
Toyota, Hyster, Crown — electric or LPG
🏓 Caravans & Campers
Investment or business-purpose only
⚓ Boats & Marine Vessels
Commercial and business-use vessels
🩸 Medical & Dental Equipment
Imaging, chairs, diagnostic equipment
⚡ Electric Vehicles
Tesla, BYD, Polestar for business use
Looking for a specific asset? Use Finance This to instantly calculate repayments for any asset type and price.
Ready to Get Rates for Your Asset?
Our brokers will search across 30+ Australian lenders and come back with your best chattel mortgage options — at no cost to you.
Get My Free Chattel Mortgage Quote →No credit check. No obligation. Response within 2 business hours.
Chattel Mortgage in Practice — Real Scenarios
Case Study 1: Owner-Driver Buying a Prime Mover
Situation: Michael operates a sole trader transport business in Queensland. He wants to purchase a 2023 Kenworth T610 for $320,000 (incl. GST). He has a 6-year ABN, clean credit, and 3 months of bank statements showing consistent income.
Finance structure: Chattel mortgage over 7 years, 6.89% p.a., 20% balloon ($64,000).
Result:
- Monthly repayment: $3,284
- GST credit claimable on next BAS: $29,091
- Year 1 interest deduction: ~$20,640
- Year 1 depreciation (SBE pool, 15% of $290,909): $43,636
- Estimated Year 1 tax benefit (combined): ~$16,069 (at 25% company rate)
*Indicative example only. Michael should confirm depreciation eligibility with his accountant.
Case Study 2: Tradie Upgrading Their Ute
Situation: Sarah is a self-employed electrician (sole trader) in Melbourne. She is buying a new Toyota HiLux SR5 for $72,000 (incl. GST). She has a 4-year ABN and is registered for GST.
Finance structure: Chattel mortgage over 5 years, 7.49% p.a., no balloon.
Result:
- Monthly repayment: $1,442
- GST credit claimable: $6,545
- Year 1 interest deduction: $4,988
- Year 1 depreciation (SBE pool, 15% of $65,455): $9,818
- Estimated Year 1 tax benefit: ~$6,519 (at 44% marginal rate including Medicare)
Case Study 3: Small Business Buying Equipment Under $20K
Situation: A small plumbing business (Pty Ltd, 25% tax rate) buys a pipe inspection camera system for $16,500 (incl. GST). It qualifies for the instant asset write-off.
Finance structure: Chattel mortgage over 3 years, 8.99% p.a., no balloon.
Result:
- Monthly repayment: $524
- GST credit: $1,500
- Instant write-off deduction (full $15,000 ex-GST in Year 1): $15,000
- Year 1 tax saving from write-off: $3,750 (at 25%)
- Total Year 1 benefit (GST + tax saving): $5,250 — against a total cost of $16,500
Frequently Asked Questions
A chattel mortgage is a business finance product. A car loan (consumer credit) is a personal finance product regulated by the National Consumer Credit Protection Act. Chattel mortgages are governed by the PPSA and carry different (often more favourable) terms for business use. The tax benefits — GST credits, interest deductions, depreciation — are only available on the business product.
Yes. Sole traders can claim the interest component of repayments as a business deduction on their individual tax return (Schedule B). Depreciation is claimed in the business income section. The GST credit goes through the BAS. Always consult your tax agent to confirm the correct treatment for your circumstances.
Not necessarily. Many lenders offer 100% finance (no deposit) for strong applications with a 2+ year ABN and clean credit. A deposit of 10–20% can help secure a lower interest rate, improve approval chances, and reduce monthly repayments. It also reduces your exposure to negative equity on depreciating assets.
Yes — same product, different name. The major banks rebranded chattel mortgages as "commercial goods loans" or "business loans – goods" in the 2010s. The ownership, GST, interest deductions, and depreciation rules are completely identical. If a bank offers you a commercial goods loan, it is a chattel mortgage.
Yes, but only the business-use proportion of tax deductions is claimable. If a vehicle is used 70% for business and 30% privately, you can deduct 70% of the interest and claim 70% of the depreciation. The GST credit is also restricted to the business-use proportion. A logbook is required to substantiate the business-use percentage. Your accountant can advise on the most tax-effective treatment.
Yes. You can refinance an existing chattel mortgage to lower your interest rate, extend the term for lower repayments, or release equity from an asset that has appreciated. Note that the original GST credit and depreciation claims do not re-occur on a refinance — you've already taken those benefits on the initial purchase.
The lender registers its security interest on the Personal Property Securities Register (PPSR). This protects the lender's interest in the asset and ensures their mortgage is enforceable. When the loan is repaid, the lender removes the PPSR registration — you own the asset free of any security interest. When buying used assets, do a PPSR check to confirm there are no existing charges.
You simply pay any remaining balloon amount (or the final regular repayment if there is no balloon), and the lender discharges the mortgage. There's no mandatory inspection, no residual renegotiation, and no option to return the asset (you own it outright). You can continue using it, sell it, trade it in, or use it as security on a new loan.
How to Apply for a Chattel Mortgage
The fastest path to approval is through a specialist broker who works with multiple lenders daily. Here’s the process on this site:
- Step 1 — Use the calculator: Run your numbers using the chattel mortgage tax calculator or Finance This tool. Understand your estimated repayments and tax benefits before you talk to anyone.
- Step 2 — Submit a quote request: Click “Get a Quote” and fill in 3 quick steps (2 minutes). Provide asset details, your business type, and contact info. No credit check at this stage.
- Step 3 — Broker searches lenders: Our licensed broker partners review your requirements and search across 30+ lenders to find the most competitive chattel mortgage rate and structure for your situation.
- Step 4 — Receive your options: You’ll receive a call or email within 2 business hours with rate options. No obligation to proceed.
- Step 5 — Formal application & approval: If you proceed, the broker manages the full application, lender negotiations, and documentation. Conditional approval is often same-day.
- Step 6 — Settlement & ownership: The lender pays the vendor. You take immediate ownership of the asset and claim your GST credit on the next BAS.