Quick Answer
Chattel mortgage and hire purchase are almost identical in practice — both give you ownership of the asset and similar tax outcomes. The main differences are legal and technical. In today's Australian market, chattel mortgage (also called commercial goods loan) is far more widely available and offered by virtually all major lenders. Hire purchase is largely a legacy product.
Side-by-Side Comparison
- ✓ Ownership from settlement day
- ✓ Lender registers PPSR charge as security
- ✓ Full GST credit upfront (next BAS)
- ✓ Interest fully deductible
- ✓ Depreciation claimable (all ATO methods)
- ✓ Optional balloon (0–50%)
- ✓ Widely available — most lenders
- ✓ Sell asset any time
- — Lender technically owns during term
- — Title transfers on final payment
- ✓ Full GST credit upfront (same as CM)
- ✓ Interest deductible
- ✓ Depreciation claimable
- — Balloon optional
- — Limited availability — fewer lenders
- — Selling asset requires lender consent
| Feature | Chattel Mortgage | Hire Purchase |
|---|---|---|
| Legal ownership during term | Borrower owns from day one | Lender owns; transfers at final payment |
| GST credit timing | Upfront — full amount on next BAS | Upfront — same treatment |
| Interest deductible | ✓ Yes | ✓ Yes |
| Depreciation | ✓ All ATO methods | ✓ All ATO methods |
| Balloon payment | Optional (any amount) | Optional (any amount) |
| Early payout | ✓ Yes (break cost may apply) | ✓ Yes |
| Sell asset mid-term | ✓ Yes — you own it | Lender consent required |
| Market availability | Universal — all major lenders | Limited — legacy product |
| Also known as | Commercial goods loan | Conditional sale agreement |
The Key Difference: Legal Ownership
The fundamental legal difference is when title (legal ownership) transfers to the borrower:
- With a chattel mortgage, you take legal title (ownership) immediately at settlement. The lender secures its interest by registering a mortgage charge on the PPSR (Personal Property Securities Register).
- With hire purchase, the lender retains legal title during the contract term. You have possession and use of the asset, but the lender owns it until you make the final payment — at which point title passes to you.
In practical terms for most businesses, the difference is minor because:
- The GST treatment is the same (upfront claim for both)
- The tax deductions are essentially the same
- The repayment structure is the same
The most meaningful practical impact is: under a hire purchase you cannot sell the asset without the lender's consent, because they technically own it. Under a chattel mortgage you own it, so you can sell it whenever you like (you'd need to payout the loan from proceeds, but you don't need permission).
Why Chattel Mortgage Is Now the Standard
Hire purchase was the dominant structure in Australia until the late 1990s. The widespread adoption of the chattel mortgage structure (and later the commercial goods loan rebrand) has made hire purchase largely redundant. Here's why:
- Lender preference — chattel mortgage registration on the PPSR is a cleaner, more modern security instrument than the conditional sale agreement used in hire purchase
- Market standardisation — as major banks moved to "commercial goods loans," the market followed the chattel mortgage structure
- Consumer familiarity — most businesses and accountants are familiar with chattel mortgage terminology and its tax treatment
- PPSA legislation — the Personal Property Securities Act 2009 established a unified national register that made chattel mortgage security registrations straightforward
If a lender tells you they don't offer hire purchase, they almost certainly offer chattel mortgage — which achieves identical practical and tax outcomes for your business.
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FAQs
Yes, but it's rare. Most major banks and non-bank lenders in Australia have moved to the chattel mortgage (commercial goods loan) structure. A few specialist lenders and some equipment dealers still offer hire purchase agreements, but it's not commonly needed given that chattel mortgage delivers identical practical outcomes.
Yes — for practical purposes, the tax deductions are identical. Both allow you to deduct the interest component of repayments, claim depreciation on the asset, and claim the full GST upfront. The ATO treats both structures similarly for income tax and GST purposes. Always confirm with your accountant for your specific circumstances.
Absolutely — and in most cases that's exactly what your lender will offer. They achieve the same commercial outcome. Ask your broker for a chattel mortgage quote; they will source competitive options from multiple lenders.
Yes. Both hire purchase and chattel mortgage appear on the balance sheet — the asset is recorded as a fixed asset and the corresponding loan is a liability. This is similar to the treatment under AASB 16 for finance leases.