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Chattel Mortgage (CM)

A Chattel Mortgage is a loan where the financier takes a charge over the goods to be financed and this charge is registered with ASIC and\or the Land Title Office under a Bill of Sale. In legal terms the title to the goods is in the name of the customer but they offer the goods as security to the financier who registers a charge over that asset.

As a result, since the introduction of GST, the popularity of CM’s has grown. Given that the assets ownership lies with the borrower, if the borrower is GST registered they usually have the right to claim the GST which is included in the invoice amount of the asset. There is no GST applicable to the supply of the finance unlike a Commercial Hire Purchase CHP or Finance Lease. It is therefore attractive to the borrower who pays GST based on the cash method. This type of borrower entering a CHP must amortise the GST claim over the term of the finance. The same borrower financing via a Chattel Mortgage can claim usually the GST in one amount.

A Chattel Mortgage is similar in many ways to the Commercial Hire Purchase, CHP. The GST inclusive price of the asset is financed, the product is fixed interest, finance terms usually vary between 12-60 months, equity by way of a deposit can be applied to reduce amount financed, instalments can be fully amortised or structured with a balloon and there is no GST applicable to the monthly instalment, balloon or payout amount.

Obviously as a borrower you should seek advice from your accountant or financial adviser when considering the motor vehicle or plant and equipment finance option that best meets your needs.

Contact a finance broker on 02 8002 4035 for an indicitave quote on your chattel mortgage requirements.