One of the biggest reasons ABN holders choose a chattel mortgage over other types of vehicle finance is the potential chattel mortgage tax benefits available when the car is used for business. Here’s a plain-English rundown of what those benefits typically look like — though you should always confirm your own position with your accountant, since every business’s tax circumstances are different.

GST Credits on Purchase

Because you take ownership of the vehicle immediately under a chattel mortgage, GST-registered businesses can generally claim the GST included in the purchase price as an input tax credit, up to the car limit set by the ATO, in the BAS period the car was purchased or first used for business — rather than spreading it out over the life of the loan.

Depreciation Deductions

Since the vehicle is a business asset from day one, it can typically be depreciated over its effective life, allowing you to claim a deduction for the decline in value each financial year. Businesses that meet the eligibility criteria may also be able to access instant asset write-off or accelerated depreciation rules in the year the vehicle is purchased.

Interest Deductions

The interest charged on a chattel mortgage used to finance a business vehicle is generally tax-deductible, in proportion to how much the vehicle is used for business purposes. If the car is used partly for personal use, you’ll need to apportion the deduction accordingly.

Balloon Payments and Cash Flow

Many business owners structure a chattel mortgage with a balloon (residual) payment at the end of the loan term to keep regular repayments lower. This can help with cash flow during the loan, though it’s worth planning ahead for how that final balloon amount will be paid or refinanced.

Talk to Your Accountant

This article is general information only, not tax or financial advice — the benefits above depend on your business structure, how the vehicle is used, and current ATO rules, which can change. Always confirm the specifics with your accountant or tax adviser before making a decision.

Curious what your repayments could look like? Use our business car loan calculator to run the numbers, or get a free business car loan quote and we’ll match you with a broker who can talk you through your options.