Chattel Mortgage Finance

What is it?

A Chattel Mortgage is a business loan facility utilised for the acquisition of equipment. The borrower or mortgagee takes legal ownership of the equipment at lease commencement and the mortgagor or lender takes a mortgage over the equipment as security. A fixed charge is also generally registered against the mortgagee entity via an ASIC form 309.

Equipment commonly leased with Chattel Mortgage


No upfront cash outlay
Equipment ownership transferred
GST may be claimed upfront
Flexible terms between 2-5 years


Payments not 100% tax deductible
Approval criteria may be more stringent
than other products
Not flexible with upgrading equipment
May not provide best cash flow
outcomes due to tax treatment
Administratively more onerous from
accounting perspective
Expensive on fees i.e ASIC form 309
and 312 generally registered by lender
at borrower cost

What type of business uses Chattel Mortgage?

Chattel Mortgages are generally used by businesses that want to ensure equipment ownership and who can claim the GST upfront. In practice this tends to mean smaller businesses who use the cash method of accounting (i.e turnover of less than $1 million).

Tax and accounting treatment for Chattel Mortgage

The equipment is recognised as an asset in the mortgagee balance sheet. The Interest component of the lease payment and the depreciation allowance for the equipment may be claimed as deductibles for tax purposes. The GST on the equipment can be claimed upfront if the business uses the cash accounting method.


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