A chattel mortgage is a financing facility that may allow the purchaser to claim (Upfront) the GST content of the vehicle purchase if the purchaser is registered for GST.
What is Chattel Mortgage?
A chattel mortgage occurs where a bank or finance company provides a loan or loan facility to a business large or small, a contractor, a self-employed person, the business uses that facility to purchase an asset such as a motor vehicle or plant and equipment, predominantly for business use.
Unlike hire purchase agreements, under a chattel mortgage the borrower becomes the owner of the motor vehicle at the time that the agreement is entered into. Security for this form of loan is a mortgage or security over the goods purchased.
How does chattel mortgage work?
Under a chattel mortgage the lender funds the purchase of the vehicle. The customer takes ownership of the motor vehicle at the time of purchase. The lender or finance company takes a mortgage or security over goods as security for the loan. Once the contract is completed, the mortgage is removed giving the customer clear title to the motor vehicle.
Chattel mortgage features
• Low establishment fees and monthly fees,
• Chattel mortgage terms range from 1 to 7 years,
• Chattel mortgage repayments are fixed for the term,
• The interest rate is fixed for the term of the chattel mortgage agreement,
• No GST is charged on the monthly chattel mortgage payment,
• Customers registered for GST may be able to claim the GST that is included in the vehicle purchase price,
• A tax deduction may be available if used for business use, usually depreciation, running costs, GST and the interest content of the loan.
Check out your Chattel Mortgage repayments with our loan repayment calculator.
Who Would Get a Chattel Mortgage?
A chattel mortgage suits someone who is going to use a motor vehicle predominately for business use, therefore this car financing product is used by companies, trusts, sole traders, partnerships and ABN holders. To find out if this option is right for you, call our team on 08 9472 3000.
Chattel Mortgage Taxation Implications
A cash basis taxpayer for GST purposes may be entitled to claim all of the GST input tax credit up to the luxury car tax threshold or depreciation limit in relation to an acquisition using the chattel mortgage product at the commencement of the arrangement.
The monthly repayment or balloon amount is not subject to GST. Cash basis taxpayers still retain their rights to claim depreciation and interest on the motor vehicle acquired under a chattel mortgage facility. Please confirm that this type of facility is appropriate and seek independent financial advice.
Chattel Mortgage Calculator
A Chattel Mortgage Calculator provides you with a guide as to what your repayments might be. At Yes Loans, we are committed to providing you with the most competitive rates available.
Click here to use our repayment calculator here.
To find out how our Chattel mortgage products can help you, contact us here online or by calling 9472 3000.