A chattel mortgage is the most popular asset finance structure in Australia. You own the asset from day one, claim GST upfront, and deduct interest and depreciation. Here's everything you need to know.
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.
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.
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Open Calculator →A chattel mortgage is typically the best fit for:
It's particularly popular with tradies buying utes, transport operators buying trucks, and farmers buying tractors — any GST-registered business acquiring a productive asset.
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.
All interest paid on the chattel mortgage is a tax-deductible business expense, reducing your taxable income each year.
As the legal owner, you depreciate the asset over its effective life (as set by the ATO). For example:
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 | 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 |
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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