Chattel Mortgage

A Chattel Mortgage is a business loan secured against movable personal property (equipment, vehicles, machinery). You own the asset from day one, but the lender places a mortgage over it as security until you repay the loan. It's the most popular equipment finance structure in Australia because ABN holders can claim the full GST credit upfront and deduct interest and depreciation. You make regular repayments (monthly, quarterly, or seasonally) over 1-7 years, and once the loan is paid off, the lender removes the mortgage and you own the asset outright with no restrictions.

Yes, if you're registered for GST. With a Chattel Mortgage you own the asset from day one, which means you can claim the full GST credit on your next BAS (Business Activity Statement). For example, if you buy a $110,000 excavator (including $10,000 GST), you claim back the $10,000 GST and only need to finance $100,000. This significantly improves your cash flow compared to Hire Purchase where GST is claimed progressively. This is the primary reason most GST-registered businesses prefer Chattel Mortgage over other equipment finance structures.

You can claim two types of tax deductions: interest payments and depreciation. The interest portion of your monthly repayments is 100% tax deductible as a business expense. Additionally, you can depreciate the equipment's value over its effective life (set by the ATO) and claim this as a deduction. For equipment under $20,000, the instant asset write-off may allow you to claim the full cost immediately. For example, a $100,000 excavator financed over 5 years at 8% p.a. might generate $8,000 annual interest deductions plus $15,000-20,000 depreciation deductions. Always consult your accountant for your specific tax situation.

Balloon payments (also called residual values) defer 10-50% of the loan to the end of the term, significantly reducing monthly repayments. This is useful if you want to preserve cash flow, upgrade equipment regularly, or match repayments to equipment revenue. For example, a $100,000 loan over 5 years at 8% with a 30% balloon reduces monthly payments from $2,027 to approximately $1,516. At loan end, you either pay the balloon, refinance it, trade in the equipment, or sell it privately. However, you pay more total interest with a balloon. Choose based on your cash flow needs and equipment upgrade plans.

Chattel Mortgage rates typically range from 5% to 10% p.a. for established businesses with good credit. New equipment from reputable manufacturers attracts better rates (5-7% p.a.) than older used assets (8-10% p.a.). Your rate depends on business trading history, credit profile, deposit size, loan amount, and equipment type. Businesses operating less than 2 years or with credit issues may pay 10-12% p.a. High-value equipment ($500k+) from private lenders might be 8-11% p.a. We shop your application across multiple specialist equipment lenders to find the best rate for your situation.

Yes, but there are age restrictions and rates are higher than new equipment. Most lenders finance equipment up to 10-15 years old at loan end (not at purchase). For example, if you want a 5-year loan, equipment can generally be up to 10 years old at purchase. Older equipment attracts higher interest rates (typically 1-3% higher than new) and lower loan-to-value ratios (you'll need a larger deposit). Well-maintained equipment from reputable brands is easier to approve. Expect to provide independent valuations for used equipment over $50,000, and lenders may require professional inspections for construction or agricultural machinery.

Deposit requirements vary by lender and equipment type. New equipment from authorized dealers often requires 10-20% deposit. Used or older equipment may need 20-30% deposit. High-risk equipment categories (hospitality, fitness) might require 30% deposit. However, strong businesses with excellent financials can sometimes access 100% finance for new equipment. If you're trading in old equipment, the trade-in value counts toward your deposit. Larger deposits result in lower interest rates and higher approval rates. For startups or businesses under 2 years old, expect to provide 30-40% deposit regardless of equipment type.

Yes, but approval is more challenging and rates are higher. Most mainstream lenders prefer 2+ years trading history with consistent profitability. However, specialist equipment lenders work with startups and newer businesses if you have strong financials, relevant industry experience, and larger deposits (typically 30-40%). If you can demonstrate solid cash flow, a good business plan, and personal assets, approval is possible. Some lenders offer startup packages specifically for new businesses in construction, medical, and transport industries. Sole traders and partnerships may find it easier than companies. We work with lenders who specialize in newer businesses.