Chattel Mortgage

Equipment Finance

Under a Chattel Mortgage the customer takes ownership of the equipment (chattel) at the time of purchase.

How does a Chattel Mortgage work?

Under a Chattel Mortgage the financier advances funds to the customer to purchase business equipment, and the customer takes ownership of the equipment (chattel) at the time of purchase.

The financier then takes a mortgage over the equipment as security for the loan.

Once the contract is completed, the mortgage is removed giving the customer clear title to the equipment.

Benefits of a Chattel Mortgage

  • Flexible contract terms
  • Fixed interest rates
  • Fixed monthly lease rentals
  • Costs are known in advance
  • Deposit (either cash or trade-in) may be used
  • A residual can be applied to contract, lowering monthly payments
  • Tax deductions can be claimed for depreciation of the equipment
  • Customers registered for GST can claim the GST in the equipment's price
  • Ability to structure your repayments to suit cash-flow trends

Tax implications of a Chattel Mortgage

GST is charged in the purchase price of the equipment but not the monthly rental or the contract balloon (final instalment).

Where the customer is registered for GST, they can claim some or all of the GST contained in the equipment's price as soon as they lodge their next BAS, rather than over the term of the loan.

Under a Chattel Mortgage the customer can claim the depreciation of the equipment as a tax deduction.

Other options

If you are considering an Chattel Mortgage, you may also want to take a look at Asset Lease, Commercial Hire Purchase and Equipment Rental as other possible finance options.