Chattel Mortgage FAQ

A chattel mortgage is a business asset finance product. "Chattel" refers to a movable asset and "mortgage" describes the lender's security. The borrower owns the asset from settlement while the lender holds registered security until every secured amount is repaid and the charge is discharged.

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 instead of assuming differently named products 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. The borrower owns the asset during a chattel mortgage, while the financier owns it during a finance lease. GST credits, tax ownership, accounting treatment, residuals and end-of-term options depend on the transaction and contract. 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.

Sole traders, companies, trusts and partnerships can apply for a genuine business-purpose transaction. An ABN alone does not establish eligibility; lenders assess the applicant, cash flow, asset, seller, contribution, credit profile, term, balloon and supporting evidence.

Business-purpose applications ordinarily require the correct entity and ABN details. ABN age is only one part of assessment and does not create an entitlement to finance. Trading history, cash flow, the asset, seller, contribution, credit profile and supporting evidence can all matter.

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.

A startup can apply, but available options depend on the whole transaction. Assessment may place greater weight on relevant industry experience, current cash flow, contracts or pipeline, the asset, contribution and supporting evidence. A new ABN alone is neither an approval nor a decline rule.

A trustee may apply in its capacity as trustee, subject to the trust deed, applicant and transaction. Trust and trustee documents, authority, beneficial-owner information, financial evidence and guarantees may be requested. See the business-structure guide.

Prepare identity and entity documents, an asset quote or invoice, seller details, business bank information and financial evidence relevant to the application. Trusts and companies may need additional governing documents. The final list varies by transaction; see the asset finance application checklist.

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.

A GST-registered business may claim the creditable business-use portion of GST on an eligible acquisition when the normal requirements are met. Private use, tax-invoice requirements, motor-vehicle credit limits and other restrictions can reduce the amount or affect timing. See the full GST guide.

The BAS period depends on the business's GST accounting basis, when consideration is provided, when an invoice is issued and the normal attribution rules. Finance settlement alone does not determine the BAS period.

The business-use portion of eligible interest may be deductible under current law. Principal is not interest, and private or non-income-producing use may require apportionment. Confirm the treatment with a registered tax adviser.

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.

The enacted $20,000 extension ended on 30 June 2026. A bill proposes a permanent $20,000 threshold from 1 July 2026, but it was not law when this page was reviewed on 11 August 2026. Confirm the law in force and every eligibility test before claiming an immediate deduction. See the bill-status 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.

GST registration is not necessarily required for finance eligibility, but an unregistered entity cannot claim input tax credits. Interest and depreciation remain separate income-tax questions. Voluntary GST registration creates ongoing reporting obligations, so obtain tax advice before registering for one purchase.

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.

The permitted balloon is contract-specific and can depend on the asset, age at the end of term, term length and assessed future value. Do not treat a generic percentage as an entitlement. Compare a no-balloon scenario and ensure the end-of-term amount remains manageable.

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.

Trade-in equity may be included in a proposed transaction, subject to valuation, payout and settlement mechanics. Net equity is the accepted trade value less the current payout; confirm how it is shown on the invoice and finance documents.

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.

Available repayment frequencies are contract-specific. Compare the actual repayment schedule and total amount payable; changing display frequency in a calculator does not establish which frequencies a financier will offer or change the contractual interest calculation.

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.

Tractors, headers, harvesters, hay equipment and other farm machinery may be financed under a chattel mortgage, subject to lender assessment. GST, depreciation and any immediate deduction depend on the entity, business use, asset and law in force. See agricultural finance.

Extra repayments and early payout rights depend on the contract. Request the lender's dated payout method, break costs and other fees before signing and again before any proposed sale or refinance.

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.