How the Chattel Mortgage GST Credit Works
Under Australia's GST system, when a GST-registered business purchases a business asset, it can claim back the GST it paid on that purchase. This is called an input tax credit.
With a chattel mortgage, the GST is payable on the full purchase price at settlement — not spread over repayments. Because you own the asset from day one, you can claim the full GST credit in your very next BAS.
The Formula Is Simple
GST Credit = Purchase Price (incl. GST) ÷ 11
This is always 1/11th of the purchase price because GST is 10% of the ex-GST price, or 1/11th of the total including GST price.
Step-by-Step: How It Flows Through
GST Credit Examples
| Purchase Price (incl. GST) | GST Credit Claimable | Effective Net Cost to Business |
|---|---|---|
| $22,000 | $2,000 | $20,000 |
| $55,000 | $5,000 | $50,000 |
| $77,000 | $7,000 | $70,000 |
| $110,000 | $10,000 | $100,000 |
| $165,000 | $15,000 | $150,000 |
| $275,000 | $25,000 | $250,000 |
| $550,000 | $50,000 | $500,000 |
These examples assume 100% business use and GST registration. Partial business use reduces the claimable amount proportionally.
Who Can Claim the GST Credit?
You Must Be GST-Registered
Only businesses registered for GST can claim input tax credits. If your annual turnover is:
- $75,000 or more — you are required to register for GST
- Under $75,000 — you can voluntarily register for GST (and should consider it if buying assets)
The Asset Must Be Used for Business
You can only claim the credit to the extent the asset is used for your business (GST-taxable activities). If the asset has mixed personal/business use:
- 100% business use = claim the full GST credit
- 70% business use = claim 70% of the GST credit
- 0% business use = no GST credit claimable
A logbook is the recommended way to document business use for vehicles.
You Need a Valid Tax Invoice
The vendor must provide a valid tax invoice showing the GST amount. For vehicles and equipment purchases, the dealer invoice is usually sufficient. For private sales where the seller is not GST-registered, there is no GST component to claim.
📌 Private Sales — No GST if Seller Is Not Registered
If you buy a used asset from a private individual who is not GST-registered (common for private vehicle sales), there is no GST on the purchase price — and therefore no GST credit to claim. However, you can still claim interest deductions and depreciation on a private purchase under a chattel mortgage.
Estimate Your GST Credit
Use the free chattel mortgage calculator to see your exact GST credit, interest deductions and net Year 1 cost.
Calculate GST & Repayments →Chattel Mortgage vs Finance Lease: GST Timing
This is one of the most practically significant differences between the two structures:
Claim the entire GST credit in one lump sum on your very next BAS after settlement. Cash arrives within 28 days of lodging.
Claim the GST component in each individual repayment. The same total is eventually claimed, but spread over 3–7 years — much slower cash recovery.
On a $110,000 vehicle, the chattel mortgage returns $10,000 in Year 1. The finance lease returns ~$167/month over 5 years. For businesses with cash flow pressures or significant investment cycles, the upfront credit is a material advantage.
Luxury Car Tax (LCT) — What to Know
Luxury Car Tax applies to passenger vehicles that exceed the LCT threshold ($91,387 for the 2025–26 financial year for most vehicles; higher for fuel-efficient vehicles). LCT is calculated on the amount exceeding the threshold.
The LCT treatment under a chattel mortgage:
- LCT is built into the vehicle's purchase price by the dealer
- You can claim the GST component of the LCT as an input tax credit
- However, there are depreciation limits (car cost limit) that cap the depreciable value of passenger vehicles — even if you paid more
- The car cost limit for 2025–26 is $69,674
LCT and car cost limits primarily affect passenger vehicles (cars). Commercial vehicles (trucks, utes classified as goods vehicles, forklifts, excavators, etc.) are generally exempt from LCT and the car cost limit.
Always confirm the LCT and depreciation limit treatment with your accountant for your specific vehicle.
Chattel Mortgage GST FAQs
No. Only GST-registered businesses can claim input tax credits. If your turnover is over $75,000 you are required to register; under that threshold it's optional. If you're buying a significant asset, it's worth considering voluntary GST registration as the upfront credit alone can be substantial.
On the purchase price. The GST is payable when ownership of the asset changes hands (at settlement). Your loan repayments are principal and interest — neither component has GST. The one-off GST credit is for the original purchase.
You can claim 60% of the available GST credit. So on a $110,000 vehicle, you could claim 60% × $10,000 = $6,000. Your depreciation claims and interest deductions are also limited to 60% of their full amounts. A vehicle logbook is the ATO's recommended method to document business use.
Only if the private seller is GST-registered and the sale includes a tax invoice with GST. Many private individual sellers are not GST-registered, in which case there is no GST on the purchase and nothing to claim. Equipment purchased through a dealer is almost always subject to GST.
The ATO's guidance on claiming GST credits on asset purchases is available at ato.gov.au — Claiming GST Credits. The specific treatment of chattel mortgages as instalment finance is covered in ATO's guidance on financial supplies and input tax credits.
No. A GST input tax credit is a reduction of your GST liability — it's not income and doesn't increase your taxable income. It also reduces the cost base of the asset for depreciation purposes (you depreciate the ex-GST cost, not the GST-inclusive cost).