Chattel Mortgage Explained: The Tax-Smart Way to Finance a Business Vehicle or Equipment
What Is a Chattel Mortgage? (Also Called a Business Car Loan, Equipment Loan or ABN Loan)
A chattel mortgage is a business loan used to buy a vehicle, machinery or equipment, where the asset itself secures the loan. Despite the old-fashioned name, it is simply what most banks call a business car loan or equipment loan. Your business owns the asset from day one. You make fixed repayments over 1–7 years. When the loan is repaid, the lender's security is removed and you own the asset outright.
Why So Many Names for the Same Thing?
If you've ever gone to your bank looking for a loan to buy a work ute or a piece of equipment and felt confused by the terminology , you're not alone. The product that brokers and lenders call a 'chattel mortgage' goes by several different names depending on who you're talking to:
| What they call it | Who uses this term | What it actually means |
|---|---|---|
| Chattel mortgage | Finance brokers, accountants, specialist lenders | The official legal/industry term — 'chattel' means movable property. |
| Business car loan / equipment loan | NAB, CommBank, ANZ | Big four banks' consumer-friendly name for the same product. |
| Goods loan | Westpac | Westpac's branded term — same product, different label. |
| ABN loan / ABN car loan | Customers, brokers, online lenders | Informal name used because you need an ABN to access it. |
| Asset loan | ANZ, some non-bank lenders | Used for broader asset types beyond vehicles. |
| Commercial loan & mortgage | Pepper Money | Another branded variation — same underlying structure. |
Regardless of what your lender calls it, the product works the same way. In this article, we use 'chattel mortgage' because that's the term your accountant will use, and the one that matters when it comes to tax time.
PLAIN ENGLISH → Think of it like a home mortgage, but for a work vehicle or piece of equipment instead of a house. The bank lends you the money, you use the asset straight away, and the loan is secured against that asset, not your house.
How a Chattel Mortgage Actually Works, Step by Step:
Here's what the process looks like from finding the asset to owning it outright:
| Stage | What happens | |
|---|---|---|
| 1 | You find the asset | Choose your vehicle or equipment from a dealer or private seller. New or used both work, though older or higher-kilometre assets may have lender restrictions. |
| 2 | Application & approval | You (or your broker) lodge an application. The lender assesses your business, creditworthiness and the asset. Most equipment finance decisions come within 24–72 hours. |
| 3 | Settlement | The lender pays the seller directly. You take ownership of the asset from day one. The lender registers a security interest on the PPSR (a national register of secured assets). |
| 4 | Repayments | Fixed monthly repayments over your chosen term (1–7 years). Rate is usually fixed, giving you predictable cash flow. You can opt for a balloon payment to reduce monthly repayments — more on that below. |
| 5 | Final payment | Loan fully repaid (including any balloon). The lender removes their registration from the PPSR. You own the asset free and clear — sell it, keep it, or trade it in. |
What Does 'Chattel' Actually Mean?
The word 'chattel' comes from Old English and simply means 'movable personal property', anything that can be physically moved, as opposed to land or buildings. A vehicle, a piece of machinery, a forklift, these are all chattels. The 'mortgage' part refers to the security interest the lender holds over the asset. Put them together and you have a secured loan against movable property. It's an old legal term that stuck around in the finance industry even as the banks moved to friendlier names.
What Is a Balloon Payment, and Should You Use One?
A balloon payment (sometimes called a residual) is a lump sum you agree to pay at the end of the loan term. It reduces your regular monthly repayments throughout the loan, but means a larger amount is owing at the end.
Example: on an $80,000 ute over 5 years at 8% interest, a 20% balloon ($16,000) reduces monthly repayments from approximately $1,622 to $1,404, saving $218 per month. But you'll pay roughly $2,900 more in total interest over the life of the loan, and owe $16,000 at the end.
Balloon payments suit businesses with strong cash flow at the end of the term, or those planning to trade in the asset (the trade-in value can cover the balloon). They're not right for everyone, and Cameron will always model the total cost before recommending one.
Who Can Get a Chattel Mortgage? Eligibility Explained
A chattel mortgage is for business use only, which is why you need an ABN to apply (hence the nickname 'ABN loan'). The main eligibility requirements are:
An active Australian Business Number (ABN). Most lenders want the ABN registered for at least 6–12 months; some prime lenders require 2 years.
The asset must be used primarily for business, at least 51% of the time. If you're a sole trader who uses a vehicle for both work and personal use, only the business-use portion attracts tax benefits.
A serviceable credit history. Major banks typically want scores of 625 or higher. Specialist lenders may go lower, particularly for newer businesses with strong cash flow.
Basic business documentation. Bank statements (3–6 months), driver's licence and ABN are usually enough. Larger loans or bank applications may require tax returns and BAS.
GOOD TO KNOW → Sole traders are fully eligible for a chattel mortgage. You don't need to operate as a company. If you're a tradie, a freelancer, a self-employed operator, if you have an ABN and are using the asset for work, you can access this product.
What Can You Finance Under a Chattel Mortgage?
Despite being commonly associated with work vehicles, a chattel mortgage covers a broad range of business assets:
| Asset type | Common examples |
|---|---|
| Light vehicles | Cars, utes, SUVs, vans, motorcycles — for sales reps, tradies, sole traders. |
| Commercial vehicles | Trucks, trailers, buses, tippers, heavy transport vehicles. |
| Construction equipment | Excavators, bobcats, skid steers, concrete pumps, scaffolding. |
| Agricultural machinery | Tractors, harvesters, irrigation equipment, quad bikes. |
| Medical & health | Imaging equipment, dental chairs, specialist medical devices. |
| Technology & IT | Computers, servers, specialist software hardware (if serial-numbered). |
| Manufacturing & production | CNC machines, lathes, presses, conveyor systems. |
| Hospitality equipment | Commercial kitchen equipment, refrigeration, coffee machines. |
As a rule: if the asset has a serial number, is primarily used for business, and can be repossessed if needed, it can generally be financed under a chattel mortgage structure.
Tax Benefits of a Chattel Mortgage. The Reason Accountants Love Them
This is where a chattel mortgage really earns its keep compared to a standard car loan or personal loan. There are four potential tax advantages, and how much you can claim depends on your business structure and how you use the asset:
1. GST Claim Upfront
If your business is registered for GST, you can claim the entire GST component of the asset's purchase price on your very next Business Activity Statement (BAS), not drip-fed over the loan term. On a $110,000 vehicle, that's a $10,000 GST credit returned in one hit.
IMPORTANT → There is an annual car limit for the GST claim. For the 2025–26 financial year, the ATO's depreciation limit is $69,674, meaning the maximum GST you can claim on a car is $6,334. There is no such limit for plant, machinery or equipment. Always confirm your specific position with your accountant.
2. Instant Asset Write-Off
For eligible small businesses (aggregated turnover under $10 million), the $20,000 Instant Asset Write-Off allows you to claim the full cost of an eligible asset as a tax deduction in the year it's purchased and ready for use, rather than depreciating it over several years. This is now permanently extended from 1 July 2026.
CRITICAL → The Instant Asset Write-Off ONLY applies to assets purchased under a chattel mortgage or commercial hire purchase. Assets financed under a finance lease DO NOT qualify, because the lender, not your business, owns the asset. This is the single biggest tax reason to choose a chattel mortgage over a lease when the asset costs under $20,000.
3. Depreciation Claims
For assets over $20,000, or those not eligible for the write-off, you can still depreciate the asset over its effective life and claim that depreciation as a deduction each year. Chattel mortgage ownership from day one makes this possible, under a lease, the lender claims the depreciation, not you.
4. Interest Deductions
The interest component of your chattel mortgage repayments is generally tax-deductible as a business expense. This applies regardless of the asset value and is available under both chattel mortgage and hire purchase structures.
ALWAYS CONFIRM WITH YOUR ACCOUNTANT → Tax positions vary depending on your business structure, GST accounting method, proportion of business use, and whether the asset is within the applicable limits. Cameron works closely with accountants and can brief your accountant on the finance structure so they can advise on your specific position.
Chattel Mortgage vs Finance Lease vs Hire Purchase, Key Differences
Here's how the three main asset finance structures compare on the questions that matter most to Australian SMEs:
| Chattel mortgage | Finance lease | Hire purchase | |
|---|---|---|---|
| Who owns the asset? | You (from day 1) | Lender (during term) | Lender (until final payment) |
| GST claim | Upfront on full price | On each payment | Upfront on full price |
| Instant asset write-off eligible? | Yes | No | Yes |
| Interest deductible? | Yes | Lease payments deductible | Yes |
| Balance sheet treatment | Asset + liability appear | Off-balance-sheet option | Asset + liability appear |
| Balloon payment option? | Yes | Yes (residual value) | Yes |
| Best suited to... | Long-term ownership; max tax flexibility | Regular upgrades; tech that ages quickly | Gradual ownership; lower upfront cost |
In practice, about 65% of Australian business vehicle and equipment finance uses a chattel mortgage structure, it's the most common choice because it offers the strongest combination of ownership, tax flexibility and competitive rates.
Frequently asked questions:
-
Yes. A chattel mortgage is simply the legal and industry term for what most banks market as a business car loan, equipment loan or goods loan. Westpac calls theirs a 'goods loan', NAB and CommBank call it an 'equipment loan', ANZ calls it a 'vehicle or equipment loan'. They all work the same way, it's the same product under different brand names.
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Yes. A chattel mortgage is a business loan and requires an ABN. This is also why it's sometimes called an 'ABN loan' or 'ABN car loan'. Most lenders want your ABN registered for at least 6–12 months, though some specialist lenders will finance a Day 1 ABN at a higher rate.
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Yes. Both new and used vehicles qualify. Lenders may have restrictions on the age or condition of the asset, most prefer vehicles under a certain age or kilometre threshold, and older or heavily used assets may attract different terms. Your broker can identify which lenders accept the specific asset you have in mind.
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A personal car loan is for private (personal) use and carries no specific tax benefits. A chattel mortgage is for business use, requires an ABN, and provides access to GST claims, depreciation deductions, and potential instant asset write-off. If you're using a vehicle primarily for work and have an ABN, a chattel mortgage is almost always the better structure from a tax perspective.
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Yes, but only under a chattel mortgage or hire purchase structure. If you use a finance lease, the lender owns the asset, not you, so you cannot claim the write-off. This is one of the most important structuring decisions to get right before EOFY. The current $20,000 instant asset write-off is now permanent from 1 July 2026 (2026-27 Federal Budget) for eligible small businesses.
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A balloon payment is a lump sum you agree to pay at the end of the loan term, typically 20–40% of the original loan amount. It reduces your monthly repayments throughout the loan, but leaves a larger amount owing at the end. You can pay it out, refinance it, or use the trade-in value of the asset to cover it.
Want to know if a chattel mortgage is right for your next purchase?
Cameron can run through the structure, tax position and lender options in a free 20-minute strategy call. No obligation, just clear advice before you commit to anything.
