Chattel Mortgage
Chattel Mortgage Australia
A chattel mortgage is the most common and most tax-effective way for an Australian business to finance the purchase of a vehicle, a piece of equipment, machinery, technology or any other moveable business asset. You own the asset from day one, the lender holds a security interest over it until the loan is repaid, and you access a range of tax benefits that are not available under lease or rental structures. For most Australian small businesses buying an asset for business use, a chattel mortgage is the right answer.
Australian Finance & Loans is an independent finance broker with access to over 50 Australian lenders including major banks, specialist asset finance providers and non-bank commercial lenders. We arrange chattel mortgages for vehicles, trucks, trailers, earthmoving equipment, manufacturing machinery, medical equipment, agricultural plant, IT hardware, hospitality fit-outs, tools and every other category of depreciating business asset. We compare rates across the full market, identify the most competitive lender for your specific situation, and manage the application through to settlement. One application through us is assessed against every relevant lender on our panel, protecting your credit file from multiple enquiries.
How a Chattel Mortgage Works
The word "chattel" means a moveable asset. The word "mortgage" means a loan secured against that asset. Put them together and a chattel mortgage is simply a business loan where the asset you are purchasing acts as the security for the loan.
When you take out a chattel mortgage, the lender provides the funds to purchase the asset. You take ownership of the asset immediately at settlement. The lender registers a security interest over the asset on the Personal Property Securities Register (PPSR). You make regular repayments (weekly, fortnightly or monthly) over a fixed term, typically 1 to 7 years. When the loan is fully repaid, the lender removes their security interest from the PPSR and you hold the asset free and clear.
Because you own the asset from the moment of settlement, a chattel mortgage gives you immediate access to the three main tax benefits of business asset ownership: the GST input tax credit on the purchase price, the depreciation deduction (or instant asset write-off if eligible), and the interest deduction on the loan itself. No other finance structure delivers all three from day one.
Tax Benefits of a Chattel Mortgage
The tax advantages of a chattel mortgage are the primary reason it is the preferred structure for business asset purchases in Australia. Each of these benefits is available because the business owns the asset from settlement, which does not occur under a finance lease or operating lease.
GST Input Tax Credit
If your business is registered for GST, you can claim the full GST component of the purchase price as an input tax credit on your next Business Activity Statement. On a $55,000 asset (including GST), that is a $5,000 credit claimed on the BAS lodged in the quarter of purchase. This is an immediate cash flow benefit that reduces the effective out-of-pocket cost of the acquisition. Under a finance lease, the GST credit is claimed progressively on each lease payment rather than upfront, which delays the cash flow benefit across the full lease term.
Depreciation Deduction
Because you own the asset, you can claim depreciation as a tax deduction. The ATO determines the effective life of each asset type, and your accountant applies the relevant depreciation method (diminishing value or prime cost) to calculate the annual deduction. For businesses with aggregated annual turnover under $10 million, the simplified depreciation rules and the instant asset write-off may allow an immediate deduction for the full cost of assets under the current threshold, provided the asset is installed and ready for use before the relevant deadline. As of the 2025/26 financial year, the instant asset write-off threshold is $20,000 per asset. Assets costing $20,000 or more enter the small business depreciation pool at 15% in the first year and 30% of the declining balance each year after. Confirm current thresholds and eligibility with your accountant before making any purchase decision based on the write-off.
Interest Deduction
The interest component of your chattel mortgage repayments is deductible as a business expense over the life of the loan. This is separate from the depreciation deduction and applies regardless of the asset's value or whether the instant write-off is used. For a $100,000 chattel mortgage at 8.50% over 5 years, the total interest paid is approximately $23,000 to $24,000, all of which is deductible against business income over the loan term.
Important: The Tax Deduction Applies to the Asset Cost, Not the Loan Amount
One of the most common misconceptions is that you need to pay cash to claim the depreciation or instant asset write-off. This is not correct. The deduction is based on the cost of the asset, not how you pay for it. If you finance a $19,000 piece of equipment through a chattel mortgage with a $5,000 deposit and a $14,000 loan, the write-off (if eligible) is still based on the full $19,000 asset cost. You get the tax benefit and you preserve your working capital. This is exactly why chattel mortgage and the instant asset write-off work so well together.
Chattel Mortgage vs Finance Lease vs Hire Purchase
Understanding how a chattel mortgage compares to other business finance structures is critical because the structure you choose determines your tax outcome, your balance sheet treatment and your options at the end of the finance term.
Chattel Mortgage
You own the asset from settlement. You claim the GST credit upfront. You claim depreciation (or the instant write-off). You claim interest as a deduction. The asset appears on your balance sheet as both an asset and a liability. At the end of the term, you own the asset outright (or pay the balloon if one is set). This is the right structure for most business asset purchases where you intend to keep the asset long-term and want to maximise tax benefits.
Hire Purchase
The lender technically owns the asset until the final payment, at which point ownership transfers to you. However, for Australian tax purposes, a hire purchase is treated identically to a chattel mortgage. You are treated as the owner from day one, and you can claim the same GST, depreciation and interest deductions. The practical difference between a chattel mortgage and a hire purchase is minimal for most businesses. Some lenders use one term, some use the other, and the tax and accounting treatment is the same.
Finance Lease
The lender owns the asset for the entire lease term. You lease it and make regular payments. Because the lender owns the asset, the lender claims the depreciation. You cannot claim the instant asset write-off. You cannot claim the full GST upfront (it is claimed progressively on each lease payment). Your deduction is the lease payment itself, spread over the term. At the end of the lease, you may have the option to purchase the asset for a residual amount, return it, or extend the lease. A finance lease suits businesses that want to use an asset for a defined period and may want to upgrade at the end, but it does not deliver the same upfront tax benefits as a chattel mortgage.
Operating Lease
An operating lease is a rental arrangement. The lender owns the asset, you pay rent, and you return the asset at the end. There is no ownership, no depreciation claim, and no instant write-off. The lease payments are a deductible operating expense. This structure suits businesses that want short-term access to an asset without any residual obligations, but it is not a tax-planning tool in the way a chattel mortgage is.
What Assets Can Be Financed With a Chattel Mortgage
A chattel mortgage can be used to finance any moveable asset used for business purposes. The most common asset categories we arrange chattel mortgages for include:
Vehicles and transport: new cars, used cars, utes, vans, trucks and trailers, fleet vehicles, electric vehicles, motorcycles and forklifts.
Heavy machinery and construction: excavators, loaders, graders, dozers, cranes, scaffolding, earthmoving equipment and site vehicles. See our heavy machinery loans and builder and construction loans pages.
Manufacturing and engineering: CNC machines, lathes, presses, laser cutting machinery, welding equipment, air compressors, engineering equipment and manufacturing plant.
Agriculture: tractors, harvesters, irrigation systems, fencing equipment, sprayers and general farming and agriculture equipment.
Medical and dental: imaging systems, dental chairs, sterilisation equipment, patient monitoring devices and practice fit-out items. See our medical equipment loans page.
Technology and IT: servers, workstations, networking hardware, POS systems, cybersecurity infrastructure and cloud equipment. See our IT and technology loans page.
Hospitality and food service: commercial ovens, fridges, dishwashers, coffee machines, food trucks and kitchen fit-outs. See our hospitality and catering loans page.
Tools and trade equipment: power tools, diagnostic equipment, high-pressure washers, workshop fit-outs and specialist trade equipment.
Leisure and marine: boats, jet skis, caravans and RVs, and yachts where these are used for business purposes such as charter, hire or tourism operations.
Drones, robotics and specialist technology: drones and robotics, automated systems and specialist industry technology.
Chattel Mortgage Rates in Australia
Chattel mortgage rates are individually assessed based on the borrower's business profile, the asset type and the loan structure. As a general guide for 2026, rates across our panel of 50+ lenders sit within the following ranges.
New vehicles (cars, utes, vans) for established businesses with clean credit: approximately 6.50% to 9.50% per annum. Used vehicles under 10 years old: approximately 7.50% to 11.00% per annum. New equipment and machinery: approximately 7.00% to 10.50% per annum. Used or specialist equipment: approximately 8.50% to 14.00% per annum. Low-doc chattel mortgages (bank statement assessed): approximately 9.50% to 16.00% per annum. Startup businesses under 2 years of trading: approximately 10.00% to 18.00% per annum.
The factors that drive your rate include whether you are an asset-backed borrower (homeowner vs renter), the age and type of the asset, your business trading history, your bank statement conduct, your credit file, whether you are purchasing from a dealer or private sale, the loan term, whether you set a balloon payment, and your deposit amount. We compare across the full lender panel to identify the most competitive rate for your specific profile.
Balloon Payments on a Chattel Mortgage
A balloon payment (also called a residual) is an agreed lump sum payable at the end of the chattel mortgage term. Setting a balloon reduces your regular repayments during the loan, which improves cash flow during the finance period. The trade-off is that you owe a larger amount at the end of the term.
For a 5-year chattel mortgage on a $60,000 vehicle with no balloon, your monthly repayment at 8.50% per annum is approximately $1,230. With a 30% balloon ($18,000), the monthly repayment drops to approximately $940. That is a cash flow saving of roughly $290 per month, or $17,400 over the life of the loan. At the end of the term, you either pay the $18,000 balloon from cash, refinance it into a new short-term loan, or sell or trade the vehicle and use the proceeds to cover it.
For equipment that holds its value well (trucks, earthmoving plant, quality manufacturing machinery), a balloon of 15% to 30% is common and manageable. For assets that depreciate quickly (IT hardware, older vehicles, specialist technology), a lower or zero balloon is generally safer to avoid owing more than the asset is worth at the end of the term. Your broker and accountant can help you model the right balloon for your specific asset and cash flow situation.
Setting a balloon does not affect the instant asset write-off calculation. The write-off is based on the full cost of the asset regardless of the balloon amount or the deposit paid.
Who Is Eligible for a Chattel Mortgage
To be eligible for a chattel mortgage in Australia, you generally need an active Australian Business Number (ABN), the asset must be used predominantly (at least 51%) for business purposes, and you need to be registered for GST (to claim the GST input tax credit, though some lenders will arrange a chattel mortgage for non-GST-registered businesses). Chattel mortgages are available to sole traders, partnerships, companies, trusts and any other business structure with an active ABN.
Most lenders require a minimum of 6 to 12 months of ABN trading history for a standard chattel mortgage application. Some specialist lenders on our panel will consider startups with less than 6 months of trading, particularly if the director has industry experience or can demonstrate income from prior employment. Established businesses with 2 or more years of trading and clean credit access the widest range of lenders and the most competitive rates.
A personal guarantee from one or more directors is required for almost all chattel mortgages arranged through a company or trust structure. Sole traders are personally liable by default. The guarantee means the director is personally responsible for the debt if the business cannot meet its repayment obligations. We ensure every borrower understands this obligation before signing.
Low-Doc Chattel Mortgage
A low-doc chattel mortgage is assessed primarily on business bank statements rather than full financial statements and tax returns. This pathway suits sole traders who have not prepared formal financials, businesses with 6 to 24 months of trading that do not yet have two full years of accounts, businesses with complex or seasonal income, and self-employed operators whose income does not present well in formal financial statements.
For a low-doc chattel mortgage, lenders typically require 3 to 6 months of business bank statements, BAS lodgements confirming turnover, photo ID for the director, ABN and GST registration details, and the asset quote or invoice. Approval can occur within 24 to 48 hours for straightforward applications. Rates are higher than full-doc chattel mortgages, reflecting the reduced documentation, but the trade-off is speed and accessibility. Our panel includes multiple specialist low-doc lenders who assess chattel mortgage applications on this basis daily.
The Application Process
Getting a chattel mortgage through Australian Finance & Loans follows a straightforward process designed to be fast and to protect your credit file from unnecessary enquiries.
First, you tell us what you need. Call 1300 194 926, email info@australianfinanceloans.com or book a call through our website. Tell us the asset you are purchasing, the approximate cost, and a little about your business. That is all we need to start.
Second, we assess your situation against our panel of over 50 lenders and identify the most appropriate lender and structure for your specific circumstances. We consider your credit profile, trading history, asset type, deposit, preferred term and tax position. We then present you with a clear recommendation: the lender, the rate, the term, the repayment amount and the balloon (if applicable).
Third, we prepare and submit the application, manage lender queries, coordinate with you and where relevant with the asset supplier or dealer, and keep you informed at every stage. For most standard chattel mortgage applications, approval takes 24 to 48 hours and settlement follows within a few business days. We handle the process so you can focus on running your business.
Chattel Mortgage Details
Loan amounts: from $5,000 to $2,000,000 and above depending on the asset and the borrower's profile. The most common chattel mortgage amounts range from $20,000 to $150,000 for vehicles and $50,000 to $500,000 for equipment and machinery.
Loan terms: 1 to 7 years. The most common terms are 3 to 5 years for vehicles and 3 to 7 years for equipment and machinery. Shorter terms result in higher repayments but lower total interest. Longer terms reduce repayments but increase total interest cost.
Interest rates: from approximately 6.50% per annum for well-qualified borrowers on new vehicles, through to 18.00% per annum for startup businesses or specialist assets. We compare across 50+ lenders to find the most competitive rate for your specific profile.
Balloon payments: optional, typically 0% to 40% of the asset value depending on the asset type and lender. A balloon reduces repayments during the term but creates a lump sum obligation at the end.
Deposit: not always required. Many lenders offer 100% finance on chattel mortgages for new assets purchased from a dealer. A deposit of 10% to 20% can improve your rate and increase approval odds, particularly for used assets, private sales or low-doc applications.
Approval speed: 24 to 48 hours for standard applications with complete documentation. Same-day conditional approvals are available from some lenders for straightforward files submitted before midday. Complex applications requiring full financials or property security may take 5 to 15 business days.
Frequently Asked Questions About Chattel Mortgages in Australia
What is a chattel mortgage in simple terms?
A chattel mortgage is a business loan used to buy a vehicle, equipment or other moveable asset. You own the asset from day one. The lender holds a security interest over it until the loan is repaid. It is the most common form of asset finance for Australian small businesses and offers tax benefits including GST recovery, depreciation deductions and interest deductibility.
Who can get a chattel mortgage?
Any Australian business with an active ABN can apply for a chattel mortgage. This includes sole traders, partnerships, companies and trusts. The asset must be used predominantly for business purposes (at least 51% business use). Most lenders require a minimum of 6 to 12 months of trading history, though some specialist lenders consider newer businesses.
Is a chattel mortgage the same as a car loan?
Not exactly. A standard consumer car loan is for personal use vehicles. A chattel mortgage is specifically for business use vehicles and assets. The key differences are that a chattel mortgage allows you to claim GST, depreciation and interest as business deductions, which a consumer car loan does not. If you are buying a vehicle for personal use, a standard car loan is the appropriate product.
Can I claim the instant asset write-off on a chattel mortgage?
Yes. Because you own the asset from settlement under a chattel mortgage, you can claim the instant asset write-off if your business meets the eligibility criteria (aggregated turnover under $10 million, asset cost under the current threshold, asset installed and ready for use before the relevant deadline). The write-off is based on the full cost of the asset, not the loan amount. Confirm current thresholds with your accountant.
What is the difference between a chattel mortgage and a finance lease?
Ownership. With a chattel mortgage, you own the asset from day one. With a finance lease, the lender owns the asset and you lease it. This means a chattel mortgage gives you access to the instant write-off, upfront GST credit and depreciation deductions, while a finance lease does not. If maximising tax deductions is your priority, a chattel mortgage is almost always the better structure.
Do I need a deposit for a chattel mortgage?
Not always. Many lenders offer 100% finance on chattel mortgages, particularly for new assets purchased from a licensed dealer. A deposit of 10% to 20% can help you secure a better rate, reduce your repayments and improve your approval chances, especially for used assets, private sales or low-doc applications.
Can a sole trader get a chattel mortgage?
Yes. Sole traders with an active ABN are eligible for a chattel mortgage. As a sole trader, your personal and business finances are assessed together. Lenders will look at your personal credit history, business bank statement conduct and ABN trading history. A chattel mortgage gives sole traders the same GST, depreciation and interest deductions as any other business structure.
What happens at the end of a chattel mortgage?
If you have no balloon payment, the loan is fully repaid and you own the asset outright. The lender removes their security interest from the PPSR. If you have a balloon payment, you need to pay the balloon amount at the end of the term. You can pay it from cash, refinance it into a new short-term loan, or sell or trade the asset and use the proceeds to cover it.
Can I pay off a chattel mortgage early?
Yes. Most chattel mortgages can be repaid early, but early termination fees may apply. These vary by lender and are typically calculated on the remaining interest that would have been payable over the remaining term. Some lenders charge a flat fee, others charge a percentage of the outstanding balance. We advise on the early repayment terms of any loan before you commit.
Can I get a chattel mortgage with bad credit?
Yes. Several specialist lenders on our panel consider chattel mortgage applications from borrowers with defaults, missed payments or other credit impairments. The key factors are the strength of current business revenue, the quality of recent bank statement conduct, whether ATO obligations are current and the value of the asset being purchased. Rates are higher for impaired credit applications but finance is available. See our bad credit finance guide for more detail.
How does a chattel mortgage affect my BAS?
If your business is registered for GST, the full GST on the asset purchase price is claimable as an input tax credit on the BAS lodged for the quarter in which the purchase settles. For example, if you purchase a $55,000 (inc GST) vehicle and the chattel mortgage settles in February, you claim the $5,000 GST credit on your March quarter BAS. This is one of the most immediate cash flow benefits of a chattel mortgage.
Is the interest on a chattel mortgage tax deductible?
Yes. The interest component of your chattel mortgage repayments is deductible as a business expense for the duration of the loan, provided the asset is used for business purposes. This is in addition to (not instead of) the depreciation deduction on the asset itself. Always confirm the deductibility with your accountant for your specific situation.
What documents do I need to apply for a chattel mortgage?
For a standard application: ABN and GST registration details, 3 to 6 months of business bank statements, photo ID for the director, the asset quote or invoice with GST itemised, and details of any existing loans or leases. For larger loans or full-doc applications, lenders may also require financial statements, tax returns and a balance sheet. For low-doc applications, bank statements and BAS lodgements are the primary evidence. We advise you on exactly what is needed before you apply.
Why Choose Australian Finance & Loans for Your Chattel Mortgage
Independent broker: we compare 50+ lenders including major banks, specialist asset finance providers and non-bank commercial lenders to find the most competitive chattel mortgage rate for your situation.
Every asset type covered: vehicles, trucks, earthmoving, manufacturing, medical, agricultural, IT, hospitality, tools, marine and specialist equipment. We know which lenders assess which asset types and how to position your application for the best outcome.
Low-doc specialists: we know which lenders accept bank statements and BAS as primary evidence for chattel mortgage applications, giving access to businesses that do not have full financials prepared.
Fast approvals: 24 to 48 hours for standard chattel mortgage applications. Same-day conditional approvals available from select lenders.
One credit enquiry: we assess your profile across all relevant lenders before submitting a formal application, protecting your credit file from unnecessary hard enquiries.
Tax structure guidance: we work alongside your accountant to ensure the right finance structure for your tax position, including how the chattel mortgage interacts with the instant asset write-off, GST recovery and depreciation.
Honest about the guarantee: we make sure every borrower understands their personal exposure under the director guarantee before signing.
Melbourne-based team with national reach across all states and territories.
Call 1300 194 926, email info@australianfinanceloans.com or book a call to get started.
