Chattel mortgage – tax and GST implications

Are you buying a car for business purposes (50% or over)? You may have heard of a chattel mortgage. A chattel mortgage is a premium option for business owners and ABN holders. It allows them to get a great deal on car finance and possibly reduce their tax and GST outlay.

One tax deduction businesses often take advantage of in a chattel mortgage is interest charges on the loan. You may claim interest charges as deductions on your Business Activity Statement. (BAS.)

Another deduction is claiming depreciation. You may claim depreciation up to the depreciation limit, currently $57,466.00 for Financial Year 2014-15. You may also pay GST on the initial purchase price of the car; however, this GST is also claimable (if you’re registered to collect Federal Government GST.) Monthly repayments are GST free, as is any balloon or residual value payment.

For businesses registered for GST on a cash basis may also claim back the GST paid in the initial purchase back as an Input Tax Credit on their next BAS. Chattel Mortgages are flexible and low-cost car finance options for business. Terms range from 12 to 60 months and come with fixed interest rates. Businesses may apply for 100% finance and amortise other extras such as insurance in the loan. Best of all, you can budget in advance for repayments as you’ll know exactly how much you’re spending each month. You could be on the road without interrupting your cash flow!

Please note that Chattel Mortgages are not regulated under the National Credit Consumer Protection Act. The information here is of a general nature only. Consult a financial professional to learn more about chattel mortgages and if they’re right for your business.