How a Chattel Mortgage Works
A chattel mortgage is a business loan secured against a moveable asset (a "chattel"). The lender provides the funds to purchase the asset, and you grant them a mortgage over it as security. Ownership transfers to you immediately — the lender holds a charge on the asset until the loan is repaid.
Same Product, Different Name
Many Australian banks — including CBA, Westpac, NAB, and ANZ — now call their chattel mortgage product a "commercial goods loan", "business loan — goods", or "goods loan". The structure, tax treatment, and ownership rules are identical. If your bank offers a commercial goods loan, it's the same product described on this page.
Think of it like a home mortgage, but for equipment instead of property. You own the asset, use it in your business, and make regular repayments (usually monthly or weekly) until the balance — including any balloon payment — is cleared.
Key Features
- Ownership from Day 1: The asset appears on your balance sheet immediately
- GST Claim Upfront: Claim the full GST credit on your next BAS — an immediate cash benefit
- Depreciation: As the owner, you claim depreciation deductions over the asset's effective life
- Interest Deductions: All interest charged on the finance is tax-deductible
- Optional Balloon: Include a balloon (residual) payment of 0–50% to reduce regular repayments
- Fixed Rates: Most chattel mortgages carry a fixed interest rate for the full term
Calculate Chattel Mortgage Repayments
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Open Calculator →Who Is a Chattel Mortgage Best For?
A chattel mortgage is typically the best fit for:
- GST-registered businesses — you claim the full GST credit upfront, unlike leases where GST is spread across payments
- Businesses that want to own the asset — trucks, equipment, machinery you'll use for years
- Businesses that want depreciation deductions — the instant asset write-off applies to chattel mortgage (you're the owner)
- Sole traders, partnerships, companies, and trusts — all entity types can use a chattel mortgage
It's particularly popular with tradies buying utes, transport operators buying trucks, and farmers buying tractors — any GST-registered business acquiring a productive asset.
Tax Benefits of a Chattel Mortgage
1. GST Input Credit (Upfront)
The full GST on the asset purchase can be claimed on your next BAS. Example: a $110,000 truck (inc. GST) lets you claim $10,000 GST credit — cash back in your pocket within weeks.
2. Interest Deductions
All interest paid on the chattel mortgage is a tax-deductible business expense, reducing your taxable income each year.
3. Depreciation
As the legal owner, you depreciate the asset over its effective life (as set by the ATO). For example:
- Trucks: 8 years effective life
- Utes: 8 years
- Excavators: 10–12 years
- Tractors: 12–15 years
4. Instant Asset Write-Off
When the instant asset write-off is available, eligible assets financed via chattel mortgage can be fully deducted in Year 1 — because you're the owner. This can deliver thousands (or tens of thousands) in tax savings.
Tax deductions depend on your individual circumstances, business-use percentage, and current ATO rules. Always consult a qualified tax professional.
Pros and Cons
| Pros | Cons |
|---|---|
| Own the asset from day 1 | Asset on your balance sheet (increases liabilities) |
| Claim GST upfront | Must be GST-registered to benefit from upfront GST claim |
| Claim depreciation + interest | Balloon payment due at end of term (if used) |
| Eligible for instant asset write-off | You bear the residual value risk |
| Optional balloon reduces repayments | Early payout fees may apply |
| Fixed rate certainty | Not ideal if you want to return the asset |
Worked Example
A Melbourne tradie buys a Toyota HiLux SR5 for $66,000 (inc. GST) on a 5-year chattel mortgage at 6.5% with a 30% balloon:
| Purchase Price (ex-GST) | $60,000 |
| GST Claimed on Next BAS | $6,000 |
| Financed Amount (ex-GST) | $60,000 |
| Balloon (30%) | $18,000 |
| Weekly Repayment (approx.) | $205 |
| Year 1 Interest Deduction | ~$3,750 |
| Year 1 Depreciation (prime cost) | ~$7,500 |
| Total Year 1 Deductions | ~$11,250 |
Illustrative only. Use our calculator for personalised estimates.
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