Chattel Mortgage

A Chattel Mortgage is a “GST friendly” loan that can be particularly attractive for business, entitling the borrower to claim the GST component of the purchased asset "up front", while repaying the loan over time.

This style of loan is very similar to a standard loan facility where goods are “owned” by the customer and the lender takes a “mortgage” or “charge” over the goods, to secure the loan.

Overview:
Amount of Finance
  • generally from $20,000 up to 100% of the total cost (including GST)
  • borrowers can contribute some form of deposit (e.g. cash or trade-in)
Term of Finance
  • generally from 1-5 years (may vary depending upon the nature of the goods

Balloon Payment
  • may be fully amortised over the desired term, or partially amortised with a balloon payment

Repayments
  • monthly payments are fixed for the duration of the term, but can also be structured to take into account seasonal or irregular income

Nature of Goods
  • motor vehicles
  • trucks
  • plant, machinery or equipment
  • new or used
Advantages:
  Conserves
  Working
  Capital
  • allows the acquisition of required capital equipment without using operating capital for funding
Flexibility
  • structure the facility with or without a balloon payment, select the length of the finance contract and structure the repayments to suit cashflow
  • cash outflow (money paid) can be varied to match cash inflow (money coming into your business) and the term of the finance contract can be matched to the expected life of the asset, ensuring that payments are not being made on equipment that is no longer contributing towards income
Tax Deductibility
  • instalments are comprised of both a “principal” and “interest” component
  • the borrower claims for the “interest” component and depreciation on the asset as deductible expenses. (Note: the instalment itself is not tax deductible)
  • Tax detectability is determined by the extent to which goods are being used to generate assessable income
  • GST is not payable on individual loan instalments. Eligible borrowers can claim the GST component of the purchased asset as an ITC on their GST/BAS return.
  • generally, Chattel Mortgage provides a better Tax efficiency in the initial stages of a finance term, compared to say a Lease.

Need more information?

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provide further details.

Call us today on (03) 9005-6633 and experience the difference!

T (03) 9005 6633
E mail@creditlinkaustralia.com.au
A 1355 High St Malvern Vic 3144

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