Chattel Mortgage Explained

 

A chattel mortgage in recent times has catapulted to become an increasingly popular car finance choice for business owners looking for a business car finance solution. The reason for this has been the implementation by the Liberal party of GST and how the ATO views taxation on various car finance options.

 

A chattel Mortgage has many benefits compared to taking out a secured car loan. With a chattel mortgage you can finance the full purchase price, include an upfront deposit and include a balloon/ residual in order to lower your monthly payments. This is great when you are in business as it allows you to free up extra cash to maintain adequate business cash flow.

 

A chattel mortgage is basically an instrument that facilitates a Mortgage over goods (chattels) to be financed. Taxation benefits that apply to a chattel mortgage include depreciation, running costs and interest paid. GST does not apply to the monthly payments. This is similar with a commercial hire purchase. The difference between a chattel mortgage and a commercial hire purchase is that a chattel mortgage allows businesses to claim the full input tax credit from GST incurred expenses immediately on their next BAS statement.