Chattel Mortgage
Many Australian businesses use a chattel mortgage to finance the purchase of their vehicles.
It is a commercial product where the business takes ownership of the purchased vehicle immediately, with the lender taking a mortgage out over the vehicle until the loan is fully repaid. The financed asset provides security on the loan provided to the business.
Any business, including companies, trusts, partnerships and sole-traders can access a chattel mortgage. It is a requirement that the business uses the vehicle for business purposes over 50% of the time.
Unlike a novated lease, the business takes on the responsibility to pay for all vehicle operating costs, including servicing, insurance and registration independently.
Repayments may be structured to meet the requirements of the cashflow of the business. This means there are options to make repayments on weekly, fortnightly, monthly, quarterly, and even half-yearly and yearly. This approach is of benefit to businesses operating seasonally, such as tourism operators and primary producers.
There are several tax advantages to chattel mortgages, as well as giving you access to the lowest rates available.
GST does apply to the purchase price of the vehicle, however businesses that account for GST on a cash basis, are able to claim a tax credit on their next business activity statement (BAS).
A chattel mortgage has many flexible options, enabling you the option to tailor the loan in a way that is tax effective for your business.
What are the benefits of a Chattel Mortgage?
- Loan terms to suit your needs from 12 months to 7 years.
- A Chattel mortgage gives access to the lowest possible rates.
- Interest payments are tax deductible.
- You own the vehicle, so you can claim depreciation.
- Repayments can be arranged to match the cashflow cycle of your business.
- GST paid on purchase can be claimed in your upcoming BAS.
- Depending on your requirements, a residual payment (balloon payment) can be set from 0% to 70%, which can be paid later to reduce the size of repayments.
- Depending on business circumstances, 100% finance is available.
