Side-by-Side Comparison
| Feature | Chattel Mortgage (Commercial Goods Loan) | Novated Lease |
|---|---|---|
| Who It's For | ABN holders (businesses) | PAYG employees |
| Ownership | You from day 1 | Financier during term |
| ABN Required | Yes | No — salary packaging |
| GST | Claim 100% upfront | GST-free (claimed by provider) |
| Tax Benefit | Interest + depreciation deductions | Pre-tax salary deductions |
| Instant Asset Write-Off | Yes (eligible as owner) | No |
| FBT | No (business asset) | Yes — managed via ECM method |
| Running Costs | Separate (not included) | Bundled: fuel, rego, insurance, servicing |
| Residual / Balloon | Optional (0–50%) | Mandatory (ATO minimums) |
| Asset Types | Any business asset | Vehicles only |
| If You Leave Employment | N/A | Payments revert to post-tax |
| Balance Sheet | On-balance sheet | N/A (personal benefit) |
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Get a Free Recommendation →When to Choose a Chattel Mortgage
- You have an ABN: This is a business finance product — you must be operating a business.
- You're GST-registered: Claim the full GST credit upfront on your next BAS. For a $60,000 vehicle, that's $6,000 back in weeks.
- You want the instant asset write-off: Only available when you own the asset — and a chattel mortgage gives you ownership from day one.
- You need equipment, not just a vehicle: Novated leases only cover vehicles. Chattel mortgages finance any business asset.
- You want to build equity: Each payment reduces the principal and builds your ownership equity.
When to Choose a Novated Lease
- You're a PAYG employee: Novated leases are specifically designed for salaried employees.
- You want one bundled payment: Lease payments plus fuel, insurance, registration, servicing, and tyres — all deducted from your pre-tax salary.
- You want income tax savings: By salary sacrificing, you reduce your taxable income. The higher your income, the bigger the saving.
- You don't have an ABN: Novated leasing is the only asset finance option that doesn't require one.
- Your employer offers salary packaging: Check with your HR department — most large employers support novated leases.
Worked Example: $55,000 Vehicle
Comparing a $55,000 (inc GST) vehicle financed over 5 years:
| Metric | Chattel Mortgage (Business owner, GST-registered) | Novated Lease (Employee, $120K salary) |
|---|---|---|
| Purchase Price | $50,000 (ex-GST) | $50,000 (GST-free via provider) |
| Upfront GST Credit | $5,000 | N/A (provider claims) |
| Monthly Finance Payment | ~$966 | ~$780 (pre-tax deduction) |
| Monthly Running Costs | ~$450 (separate, post-tax) | ~$520 (bundled, pre-tax) |
| Effective Monthly Cost (after tax) | ~$1,220 | ~$850 |
| Year 1 Tax Saving | ~$5,400 (interest + depreciation) | ~$6,200 (salary sacrifice) |
| FBT Liability | Nil | ~$2,100/year (offset by ECM) |
Illustrative only. Actual amounts depend on lender, rate, salary, tax bracket, and FBT. Use our calculator for personalised estimates.
What If You're Both a Business Owner and Employee?
If you pay yourself a PAYG salary through your company, you may be able to access both options. Consider:
- Primary business use (trucks, equipment, work vehicles): Use a chattel mortgage through the business for maximum GST and depreciation benefits.
- Personal or mixed-use vehicle: A novated lease through your salary packaging may be more tax-efficient, especially for vehicles with significant personal use.
Talk to your accountant about the optimal split. We can arrange either structure — or both.
FAQs
Can a business owner get a novated lease?▼
Only if you pay yourself a PAYG salary through your company. Sole traders and partnerships cannot access novated leases — chattel mortgage or finance lease are your options.
Which has better tax benefits?▼
It depends on your situation. Chattel mortgage offers GST credits, depreciation, and instant asset write-off for business owners. Novated lease offers pre-tax salary deductions for employees. A chattel mortgage typically provides larger total deductions for high-value assets.
What happens if I leave my employer with a novated lease?▼
The lease reverts to you personally. Payments continue but from your post-tax income (no more salary sacrifice benefit). You can novate the lease to a new employer, refinance, or pay it out early.
Can I finance equipment with a novated lease?▼
No. Novated leases are only for vehicles (cars, utes, EVs). For equipment and machinery, you need a chattel mortgage, finance lease, or operating lease.