Chattel Mortgage FAQ

A chattel mortgage is Australia's most popular commercial asset finance product. "Chattel" refers to a moveable asset (not land), and "mortgage" describes the security — the lender holds a registered charge over the asset until you repay the loan. You own the asset from day one and make fixed repayments over a set term (typically 2–7 years). Once the loan is repaid, the lender's charge is discharged and you own the asset outright.

They are the same product with different names. The major banks (CBA, NAB, Westpac, ANZ) call it a "commercial goods loan" or "business loan – goods". Non-bank lenders and brokers typically call it a chattel mortgage. The ownership structure, GST treatment, and tax deductions are identical.

You do — from settlement day. The lender holds a registered charge (the mortgage) over the asset as security, but you own it, register it in your name, and can use it however you need for your business. Once the loan is fully repaid, the charge is discharged.

The key difference is ownership. With a chattel mortgage you own the asset — giving you depreciation deductions and the full GST credit upfront. With a finance lease the lender owns the asset — your payments are 100% deductible but you don't claim depreciation and GST is spread over payments. See the full comparison.

They are very similar — both give you ownership at the end. The main technical difference is that a hire purchase is structured as a hire agreement (you hire the asset and purchase it at the end), while a chattel mortgage transfers ownership immediately with a charge held over it. Tax treatment is broadly the same. See the full comparison.

Any moveable, business-use asset: cars, utes, vans, trucks, prime movers, trailers, forklifts, excavators, earthmoving equipment, agricultural machinery, CNC machinery, medical equipment, hospitality equipment, IT equipment and more. The asset must be identifiable (has a serial or VIN number) and used primarily for business.

Any business entity with an active ABN that uses the asset primarily for business (more than 50%). This includes companies, trusts, partnerships, and sole traders. You cannot use a chattel mortgage for a purely personal asset — it's a commercial product only.

Yes. A chattel mortgage requires an active ABN. If you don't have one, you can register at abr.gov.au for free. Most lenders require an ABN age of at least 6 months, though specialist start-up lenders exist.

Yes. Sole traders with an ABN and business-use assets access the same chattel mortgage product as companies. Deductions are claimed on the individual tax return. See the full sole trader guide.

Yes, but options are narrower. Start-up lenders exist who assess new ABNs. Typical requirements: higher deposit (20–30%), strong asset value, or a guarantor. A specialist broker can identify which lenders will consider short-ABN applications.

Yes. Discretionary trusts, unit trusts, and family trusts can access chattel mortgage finance. The loan is typically taken in the name of the trustee (individual or corporate) acting in their capacity as trustee of the trust. Most lenders require the trust deed and financial statements.

Full-doc: Last 2 years' tax returns, ATO assessment notices, 3 months bank statements, driver licence.
Low-doc: Last 12 months BAS or 6 months business bank statements, driver licence.
ABN-only/asset-based: Bank statements, asset details, larger deposit. For small loans some lenders require minimal documentation.

Getting a quote or pre-qualification does not affect your credit score. A formal credit assessment (when you proceed to application) does create a credit enquiry. AFA's quote process is designed to give you a rate indication before any credit check.

Yes — if your business is registered for GST. You claim the full GST input tax credit (1/11th of the purchase price) on your next BAS in one lump sum. On a $110,000 asset that's $10,000 back. This is one of the most significant cash flow advantages of a chattel mortgage over other structures. See the full GST guide.

You claim it on your next BAS after settlement. The ATO typically processes BAS within 28 days of lodgement, so the credit often arrives 1–3 months after purchase.

Yes. The interest component of every repayment is a tax-deductible business expense. Your lender provides an annual interest statement. The principal component is not deductible — only the interest.

Yes. Because you own the asset, you claim annual depreciation under the ATO's effective life rules. You can use the diminishing value or prime cost method. You depreciate the ex-GST cost (since you already received the GST credit). See Tax Benefits guide.

Yes — if your business turnover is under $10 million and the asset costs under $20,000 (ex-GST). You write off the full cost as an immediate deduction in the year of purchase. This is in addition to the GST credit. See the instant write-off guide.

The ex-GST cost. You already received the GST back via your BAS, so the actual cost to your business is the ex-GST price. Depreciating the GST-inclusive amount would give you a double benefit which the ATO doesn't allow.

You can still get a chattel mortgage — you just can't claim the GST input tax credit. You can still claim interest deductions and depreciation. If you're making significant asset purchases, it may be worth registering for GST voluntarily (even if your turnover is under $75,000).

A balloon payment (also called a residual) is an optional lump sum payable at the end of the loan term. You choose the balloon amount when you set up the loan. A higher balloon means lower monthly repayments — but more total interest paid over the term. See the balloon payment guide.

Unlike a finance lease (where the ATO mandates minimum residuals), a chattel mortgage balloon can be set anywhere from 0% to approximately 50% of the asset value. Most lenders have their own maximum, and some lenders have minimum balloon requirements depending on asset age and type.

It depends on your cash flow and plans for the asset. A balloon is useful if you need lower repayments now and expect to have cash or refinancing available at loan end. It's less suitable if you want to own the asset outright with no lump sum due. Always model both scenarios — the calculator shows the difference.

You have three options: (1) pay the balloon in cash and own the asset free and clear; (2) refinance the balloon into a new loan; or (3) sell the asset and use the proceeds to pay the balloon (trade-in or private sale). Many businesses trade up to a new asset at balloon time.

Not significantly. You still claim interest on the full loan, and you still depreciate the full ex-GST cost of the asset. The balloon just changes the cash flow — it doesn't change the total deductions available.

Indicative rates range from 6.29% p.a. for new vehicles with a strong application, to 14.99% p.a. for older used equipment or higher-risk profiles. Your rate depends on: asset type and age, loan amount, credit history, time in business, deposit, and which lender is used. See the rates guide for full detail.

Typical terms are 1–7 years. Most businesses choose 3, 5 or 7 years. Longer terms mean lower repayments but more total interest. Shorter terms mean higher repayments but less total interest. The calculator shows the trade-off instantly.

Not always. Many lenders offer 100% finance on new assets for established businesses with good credit. A deposit (typically 10–30%) may be required for: older used assets, lower credit score, short ABN history, or higher loan amounts. A deposit improves your rate and reduces total repayments.

Yes. Most lenders accept the equity in a trade-in vehicle or equipment as a deposit contribution. The trade-in is valued and the net equity (value minus any payout) is applied to reduce the loan amount.

Most chattel mortgages have a fixed interest rate and fixed repayments for the full term — giving you certainty on cash flow. Variable-rate options exist with some lenders but are less common. Fixed rates are generally preferred because they don't change if the RBA moves rates.

Yes. Most lenders offer weekly, fortnightly or monthly repayment frequencies. Weekly or fortnightly payments can reduce total interest slightly because you're paying down the principal faster. The calculator shows all three frequencies.

Yes. Most lenders finance used vehicles up to 10–15 years old (some allow older for certain asset classes). The GST credit applies to used assets as long as GST was charged in the sale (e.g., purchased from a registered dealer, not a private sale). Private sale purchases may not attract GST — check with your accountant.

Yes. Trucks, prime movers, tippers, rigids and semi-trailers are commonly financed on chattel mortgage. They are ideal for the product — large GST credits upfront, interest and depreciation deductions each year. See truck finance.

Yes. Equipment finance — including forklifts, excavators, dozers, graders, compactors and other earthmoving machinery — can all be financed on a chattel mortgage. The same tax benefits apply. See earthmoving finance and forklift finance.

Yes — subject to lender approval. Not all lenders finance private sales; many prefer registered dealer purchases. For private sales, no GST is typically charged, so there is no input tax credit to claim. The lender also conducts a thorough asset check (PPSR search) to confirm title.

Yes. Tractors, headers, harvesters, hay equipment and other farm machinery can be financed on chattel mortgage. The instant write-off and full depreciation claims are particularly valuable for farming businesses. See agricultural finance.

Yes. You can make extra repayments or pay out the full loan before the term ends. Most lenders charge an early termination fee — typically 1–3 months' interest or a flat break fee. Ask for the exact fee before you sign. Factor this in if you're likely to sell the asset or refinance during the term.

Yes. If rates have improved or your circumstances have changed, you can refinance — either with the same lender or a new one. Refinancing may attract a break fee and new establishment fees. A broker can model whether refinancing makes sense in your situation.

If you have a zero balloon: the loan is fully repaid and you own the asset outright — no lump sum due. If you have a balloon: pay the residual in cash, refinance it, or sell the asset to clear it. The lender then discharges the mortgage and you own the asset free and clear.

Yes — but the lender's charge must be discharged (paid out) at settlement. When you sell, the payout figure is deducted from the sale proceeds, and any remaining equity comes to you. Your broker or lender can provide a current payout figure on request.

Yes. This is a common scenario — particularly for vehicles. You sell or trade in the existing asset, use the equity to clear (or partially clear) the existing loan, and set up a new chattel mortgage on the replacement asset. A broker can structure this to minimise break costs and maximise your new loan terms.

Contact your lender immediately. Most lenders have hardship assistance policies — temporary repayment deferrals or restructuring may be available. Ignoring missed payments leads to default notices and ultimately repossession, so proactive communication with your lender is critical.