A chattel mortgage facility is a useful finance product for sole proprietors, partnerships and companies that adopt the ‘Cash’ method of accounting for GST (Goods and Services Tax) in Australia. A chattel mortgage facility is like a residential house mortgage but over equipment; it also provides the borrower with immediate ownership of the equipment while the financier secures a charge over the asset until owned outright or the loan term has finished.
Financiers of chattel mortgages will generally finance the full purchase price or require an initial deposit/trade-in to reduce the repayment commitment.
The chattel mortgage facility allows the GST component of the purchase price of the equipment (motor vehicle or other asset) to be claimed back on the entity’s next BAS (Business Activity Statement) instead of claiming the GST over the term of the finance contract.
What are the Benefits of a Chattel Mortgage?
- No capital outlay required; unless a deposit is required by the financier
- Interest charged and depreciation of the equipment are tax deductible
- Repayments can be structured with or without a balloon payment at the of the term of the loan
- Repayments are fixed over the term of the loan
- Immediate ownership of equipment
- Loan terms up to 60 months
