1. The business secures a loan from a lender to buy a truck. The loan agreement details the repayment terms, interest rate, and loan term.
  2. The business owns the truck immediately upon purchase, but the lender registers a security interest, usually through a financial agreement like the Personal Property Securities Register (PPSR)
  3. If the borrower fails to make the payments, the lender can seize the truck. If the loan is paid off without default, the lender will no longer have a security interest in the truck.

Benefits of a Chattel Mortgage

Chattel mortgages come with many benefits for businesses hoping to own a truck. Let’s look at some.

  • Can borrow from $10,000 to over $1,000,000, with loan terms anywhere from 1 to 7 years. 
  • Fixed interest rates start at 7.50% per annum for top-tier businesses—much lower than unsecured business loans.
  • Chattel mortgages can finance new or used machinery and business equipment.
  • Instant ownership of the truck, even if the lender has a security interest.

Tax Benefits of a Chattel Mortgage

If your business is registered for GST on a cash basis and you use a chattel mortgage to purchase a truck:

  • The truck will be recorded as an asset on the business’s balance sheet.
  • You can claim the GST from the truck’s purchase price in your next Business Activity Statement (BAS) after setting up the chattel mortgage.
  • You can claim depreciation on the truck through your end-of-year tax return. Since the truck is a business asset, the interest paid on your chattel mortgage is also tax-deductible. 
  • Be an Australian citizen or permanent resident
  • Have an active Australian Business Number (ABN) or Australian Company Number (ACN)
  • Have a trading history of at least six to twelve months
  • Ensure your business is GST-registered
  • Be able to provide bank statements
  • Maintain a good credit score (475+)

What to Know Before Getting a Chattel Mortgage

Tax Benefits of a Novated Lease

Eligibility Criteria of a Novated Lease

To be eligible for a novated lease, you must:

  • Be a full-time or permanent employee
  • Have access to the salary packaging policy from your employer
  • Have a truck that’s less than eight years old at the end of the lease term
  • Have employer approval