Your Complete Guide to Business Vehicle & Equipment Finance

When it comes to chattel mortgages, the benefits go beyond simply financing your vehicle or equipment — they can also deliver valuable tax advantages for your business. From claiming interest payments as deductions to leveraging depreciation and GST input tax credits, understanding how these factors work can significantly reduce your overall costs and improve cash flow. Below, we break down the key tax considerations and how to make the most of them.

Claiming Interest as a Tax Deduction

The interest portion of your chattel mortgage payments may be tax-deductible if the asset is used for business purposes.

Example:

• Monthly payment: $800
• Interest portion: $300
• Principal portion: $500
• Potential tax deduction: $300 per month

Important: Only the business-use percentage is deductible. If the vehicle is used 80% for business, you can claim 80% of the interest.

Depreciation Deductions

You may be able to claim depreciation on the asset's declining value over time.

Depreciation Methods:

• Prime Cost Method: Straight-line depreciation over the asset's effective life
• Diminishing Value Method: Higher deductions in early years, lower in later years
• Instant Asset Write-Off: For eligible small businesses, immediate deduction for assets under certain thresholds

2024-25 Instant Asset Write-Off:

• Small businesses (turnover under $10 million) can instantly deduct assets costing less than $20,000
• This can provide significant immediate tax benefits

GST Input Tax Credits

If your business is registered for GST, you may be able to claim input tax credits on the GST component of your purchase.

GST Credit Calculation:

• Full Credit: Available if the asset is used 100% for business
• Partial Credit: Proportional to business use percentage
• Car Limit: For cars, GST credits are capped at 1/11th of the ATO car limit

Example GST Calculation

Car Limit Example

Tax Planning Considerations

Balloon payments are a common feature of chattel mortgages that can offer businesses greater flexibility and improved cash flow. By deferring a portion of the loan to the end of the term, they allow you to reduce monthly repayments and free up capital for other priorities — though they do require careful planning to manage the final lump sum.

What Are Balloon Payments

A balloon payment is a lump sum — usually 20–40% of the original loan — payable at the end of your loan term. This structure means lower monthly repayments during the term, but interest is charged on the full loan amount.

Key Benefits:

• Improved cash flow: Lower monthly repayments support day-to-day business needs.

• Tax advantages: Larger outstanding balances can increase deductible interest.

• Flexibility: Refinance, trade in the asset, or sell it to cover the balloon.

 Balloon Payment Example

On an $80,000 asset over five years at 8% interest, choosing a 20% balloon ($16,000) reduces monthly payments from $1,622 to $1,404, saving $218/month, but increases total interest by around $2,934.

Example: On an $80,000 asset over five years at 8% interest, choosing a 20% balloon ($16,000) reduces monthly payments from $1,622 to $1,404, saving $218/month, but increases total interest by around $2,934.

Learn more about how balloon payments work and their pros and cons here.

A chattel mortgage can be a powerful finance solution for businesses looking to purchase vehicles, equipment, or other assets while maintaining ownership and unlocking valuable tax advantages from day one. With competitive interest rates, flexible repayment options, and potential benefits like GST input credits and depreciation claims, it’s a financing strategy designed to support growth, preserve cash flow, and strengthen your balance sheet.

Whether you’re a sole trader upgrading a work ute, a growing company expanding your fleet, or a business investing in specialised machinery, the right finance structure can make all the difference.

Ready to put a chattel mortgage to work for your business? Apply now and let Ausloans help you compare lenders, secure competitive rates, and finance the assets you need to move your business forward.