Chattel mortgage: buying a business vehicle or machine you own from day one

Ask a room of tradies and transport operators how they financed their last vehicle and “chattel mortgage” will be the most common answer by a distance. It’s simple, it puts the asset in your name, and it lines up neatly with how the GST system treats a purchase. It’s also easy to sign one without understanding the balloon, the car limit or the payout terms. Here’s the full picture.

What is a chattel mortgage?

Lawyers have used “chattel” for centuries to mean goods you can pick up and move, as opposed to land and buildings. The finance version borrows that idea: the lender takes a mortgage over that movable asset instead of over real estate.

When the deal settles, funds go straight to whoever is selling and title passes to your business. To protect its position, the financier lodges a registration against the asset’s serial number on the PPSR. If you sell the asset before the loan is cleared, the lender has to be paid out; if you default, it can repossess. When the final repayment is made, the registration is removed and the asset is yours free and clear.

It’s used for almost every kind of business asset: utes, vans, trucks, trailers, excavators, tractors, forklifts, medical equipment, kitchen gear and more.

How the GST works (and why it’s a big deal)

This is the feature that makes chattel mortgages popular with GST-registered businesses. Because you’re buying the asset outright on day one, the GST in the purchase price is part of a purchase you’ve made, not spread across lease payments. If the asset is for business use, that GST normally comes back to you through the following activity statement.

On an $88,000 truck including GST, that’s an $8,000 credit flowing back in your next activity statement, which can be meaningful when cash is tight. Some owners use it to reduce the loan or fund a first repayment. Others prefer to finance the GST-inclusive price and keep the refund as working capital.

The interest charged on the loan is input-taxed financial supply, so there’s no GST on repayments.

The car limit: one number worth knowing

The ATO sets a car limit each year. For 2026–27 it’s $69,883. It caps two things for a “car” first used in that year:

• the value you can depreciate, and
• the GST credit you can claim, which tops out at $6,353 (one-eleventh of the limit).

Picture a $95,000 dual-cab that never leaves work duties: the GST credit and depreciation are both calculated as if the vehicle cost $69,883, unless it falls outside the ATO’s definition of a car.

That definition matters more than most buyers realise. The ATO’s “car” is a passenger-style vehicle rated to haul under 1,000 kg with seating for eight or fewer. Plenty of workhorse utes, vans and light trucks carry a payload rating of 1,000 kg or above, and those sit outside the cap altogether. Check the payload rating on the manufacturer’s specifications and confirm with your accountant before you assume the cap applies (or doesn’t).

Depreciation, interest and the instant asset write-off

Because you own the asset, the business claims depreciation on it plus the interest component of each repayment, both in proportion to business use. You can’t deduct the principal part of the repayments.

If your group turnover is below $10m, any qualifying item priced under $20k can be deducted in full in year one, and since 1 July 2026 that concession is permanent rather than renewed budget by budget. More expensive assets go into the small business pool. A chattel mortgage doesn’t change eligibility: owning the asset is what counts, not how you paid for it. We unpack the interaction in a separate guide on writing off financed assets.

Want a second view on structuring your next vehicle or machine? Start a short enquiry: a handful of fields, a minute or so, and nothing lodged on your credit report.

Should you use a balloon?

With a balloon, you deliberately leave a slice of the price unpaid until the final month. Because less principal is amortised along the way, every regular instalment drops.

Paying it all down	Leaving a balloon
Higher monthly repayment	Lower monthly repayment
Asset owned outright at the end	Lump sum due at the end
Less total interest	More total interest, since more is owed for longer
Simple exit	Need a plan: pay cash, refinance, or sell or trade the asset

A balloon works best when the asset will still be worth more than the balloon at the end, so a trade-in or sale clears it comfortably. It works poorly on equipment that loses value fast or that you’ll run into the ground. See the pros and cons in our guide to balloon payments, and test different balloons with the equipment finance calculator.

What lenders check

Lenders look at	What they want
Business use	The asset is mainly for the business, not private
ABN and GST	ABN age and registration; GST status affects how the deal is written
Credit	Business and director credit files; blemishes judged in context
Capacity	Proof the repayments fit: statements for modest amounts, BAS or full accounts as the figure grows
The asset	Condition, how old it will be when the final payment lands, and who’s selling it
Deposit or trade-in	More likely for newer businesses or older assets

A worked example

A Geelong electrician buys a new van with a racking fit-out for $77,000 including GST. The van’s payload rating is over a tonne, so the car limit doesn’t apply.

• The business finances the full $77,000 over five years with a $15,000 balloon.
• On its next quarterly BAS, it claims the $7,000 GST credit and uses that to pay down the loan, which lowers future interest.
• Each year it claims the interest portion of the repayments and depreciation on the van, since it’s used solely for work.
• At the end of year five, the electrician plans to trade the van, which should comfortably exceed the $15,000 balloon, or refinance the balloon for another year or two.

The figures are illustrative, but the sequence (finance, claim the GST, plan the balloon exit) is the core of how most businesses use chattel mortgages well.

Pros, cons and when to choose something else

Pros

• Ownership from day one, so the asset sits on your balance sheet
• GST credit usually claimed upfront on your next BAS
• Interest and depreciation deductible for business use
• Flexible terms, deposits and balloons

Cons

• Asset can be repossessed if you default
• Early payout can carry costs
• A balloon must be paid or refinanced
• The car limit caps claims on higher-priced cars

Prefer the lender to own the asset and to claim rental payments instead? A finance lease may suit. Want ownership but only at the end? Hire purchase is the closer match. Our chattel mortgage vs finance lease comparison works through the differences, and the business car loans page covers vehicle-specific options.

Ready to put it in your name?

Most vehicle and equipment purchases are straightforward to fund once the structure is right, including for businesses that a bank has turned away or that have a few marks on their credit history.

Asking us costs nothing, the form is about sixty seconds long, and simply enquiring leaves no footprint on your credit history. We won’t broadcast your request to a crowd of financiers. Instead, an experienced person reviews it and calls you directly. Describe the asset, its price, whether it’s dealer or private, and your GST status accurately, since those details shape the whole deal.

Check your chattel mortgage options →