A chattel mortgage is a business loan where your business takes ownership of a vehicle or piece of equipment straight away, and the lender registers a mortgage over that asset as security until you have paid the loan off. It is one of the most common ways Australian businesses fund a work ute, a delivery van, or a new machine, largely because ABN holders can often claim the GST on the purchase up front and treat depreciation and interest as deductions.
That is the short version. The detail is where the decisions get made, so let us walk through it.
What “chattel” actually means
A chattel is simply a movable item of property. In this kind of finance, the chattel is the thing you are buying: the car, the trailer, the excavator, the coffee machine. You buy it, you own it, and you use it from the first day. The lender does not own it the way they might under some other arrangements. Instead, they take a registered interest over it, recorded on the Personal Property Securities Register, so that if you default they have a clear claim.
Once you have made the final payment, the lender removes their security interest and the asset is yours free and clear. Some lenders also let you set a balloon, or residual, amount: a lump sum left over at the end of the term that keeps your monthly repayments lower. You then pay it out, refinance it, or sell the asset to cover it.
Why business owners reach for it
The appeal is mostly about ownership and tax. Because your business owns the asset, it sits on your balance sheet, and that opens up a few treatments that a rental-style arrangement does not.
If your business is registered for GST and accounts on a cash basis, you may be able to claim the GST contained in the purchase price as an input tax credit in your next Business Activity Statement, rather than dribbling it out over the life of the loan. For a $44,000 vehicle, that can be a meaningful chunk of cash back reasonably quickly.
On top of that, the interest on the loan and the depreciation of the asset may be deductible to the extent the asset is used to produce income. If the ute is 100% for the business, the sums are straightforward. If you also do the school run in it, you apportion. This is exactly the sort of thing your accountant earns their fee on, so confirm it with them before you bank on any number.
If the wheels turn for the business, a chattel mortgage usually turns the tax in your favour. Just get the apportionment right.
Chattel mortgage versus the alternatives
It is easy to confuse the various ways to fund a car, and they are taxed quite differently. A chattel mortgage is not the same as a novated lease, which is an employee arrangement run through salary packaging, nor is it a personal car loan. The table below sketches the broad differences. Treat it as a starting point, not gospel.
| Feature | Chattel mortgage | Novated lease | Personal car loan |
|---|---|---|---|
| Who it suits | ABN holders, business use | Employees with a salary package | Private buyers |
| Who owns the asset | Your business, from day one | Financier, employee uses it | You, from day one |
| GST on purchase | Often claimable up front | Handled through the lease | Not claimable |
| Tax angle | Interest and depreciation may be deductible | Pre-tax salary, possible FBT | Generally none |
| Balloon option | Common | Built in as residual | Sometimes |
If you are weighing up the personal side of the decision too, our guide on how to finance a car lays out the consumer options in plain terms. And if the vehicle is for a brand-new venture rather than an established trading business, your lender may treat the application more cautiously, which is worth knowing before you apply.
What lenders look at
A chattel mortgage is still a loan, so the usual checks apply. Lenders generally want to see a registered ABN, and many prefer it to have been active for a period rather than minted last Tuesday. They will look at trading history, cash flow, and the deposit you can put down, if any. The asset itself matters too: newer, mainstream vehicles and equipment with a clear resale market are easier to finance than something niche.
Rates and terms vary widely between lenders, and the headline rate is not the whole story once you factor in fees, the balloon, and the term length. It pays to shop around, and you can compare business finance options to get a feel for the spread before you commit. A broker who works across multiple lenders can also be useful here, particularly for newer businesses or larger asset purchases.
A quick worked example
Say a landscaping business buys a $55,000 tipper. Here is roughly how the pieces fit together, in order:
- The business buys the tipper and takes ownership immediately.
- The lender registers a security interest over it on the PPSR.
- At the next BAS, the business claims the GST in the purchase price as an input tax credit, assuming it is registered and uses the cash method.
- Over the loan term, the business claims interest and depreciation as deductions to the extent the tipper is used for the business.
- If a balloon was set, the business pays it out, refinances it, or sells the tipper at the end of the term to cover it.
Numbers like these are illustrative and last checked June 2026. Thresholds, depreciation rules, and instant asset write-off settings change from year to year, so check the current position with the Australian Taxation Office at ato.gov.au or your accountant.
The bottom line
A chattel mortgage is a clean fit for a business that wants to own its vehicle or equipment outright while spreading the cost, and that can make use of the GST and deduction treatment that ownership unlocks. It is less suited to private buyers, who are usually better served by a standard car loan, and it sits in a different lane to a novated lease. The mechanics are not complicated, but the tax outcome depends on your registration, your accounting method, and how much you actually use the asset for the business.
This is general information, not personal financial, tax, or legal advice. Figures and rules were last checked June 2026 and can change, so confirm the tax treatment and current thresholds with your accountant and the official source before you sign anything.