A chattel mortgage is the most common way Australian businesses finance vehicles and equipment, and the reason most accountants reach for it first is the tax treatment. There are three distinct benefits: claim the GST on the purchase up front, deduct the interest portion of each repayment, and depreciate (or instant-write-off) the asset itself. The window around 30 June is when these benefits are most visible because EOFY is the cleanest accounting line in the calendar. This article walks through each one. If you want the structural basics first, read what is a chattel mortgage and how does it work.
GST: claim the input tax credit up front
Under a chattel mortgage, your business owns the asset from day one. That ownership lets you claim the GST on the asset purchase as an input tax credit in the BAS following settlement, in exactly the same way you would claim GST on any other business expense.
On a $100,000 asset purchase (GST-inclusive), the GST component is roughly $9,090. That $9,090 reduces the GST you owe the ATO in your next quarterly BAS, or comes back as a refund if you are in a credit position.
For a profitable, GST-registered business, this is real cash hitting your bank account or netting off against GST liability you would otherwise pay. It is usually the single largest tax benefit of choosing chattel mortgage over hire purchase or finance lease.
Interest: deduct the financing cost
The interest portion of every chattel mortgage repayment is a deductible business expense, the same as any other business loan interest. Your lender provides an annual interest summary that shows the split between principal and interest across the year.
Worth noting: only the interest is deductible, not the principal repayment. The principal is just paying down the asset cost, which you already account for via depreciation (see below).
For an asset financed at 8 per cent across a 5-year term, the first year of interest deductions can be 6 to 7 per cent of the loan amount. On a $100,000 financed asset, that is around $6,000 to $7,000 of deductible interest in year one, declining as the loan amortises.
Depreciation: the asset itself
Because you own the asset, you depreciate it on your books over its effective life as set out by the ATO. The two main methods are diminishing value (faster depreciation early, slowing over time) and prime cost (even depreciation across the life). Your accountant will choose based on which suits your tax position.
A passenger car capped at the depreciation limit (which changes annually with the budget), a work ute or truck depreciated over 8 years, a manufacturing machine over 10 to 15 years. The effective life schedule covers most asset categories.
The instant asset write-off
The instant asset write-off is a federal scheme that lets eligible small and medium businesses claim the full cost of qualifying assets in the year of purchase, rather than depreciating across the effective life. When it applies, it is a much bigger tax benefit than ordinary depreciation.
Eligibility, asset value thresholds, and business turnover limits all change with each federal budget. As at the most recent budget cycle, the headline rules have been in flux year to year. The right move is to check with your accountant whether the current rules apply to your purchase, the asset type, and your business turnover.
When the instant write-off does apply, a chattel mortgage purchase is the cleanest structure to use it: you own the asset (so you can write it off), you have the GST treatment up front, and the interest deduction continues against the loan.
Why this matters most around EOFY
End-of-financial-year (30 June) is when these benefits show up in the books. Three timing decisions tend to dominate the EOFY conversation:
Settle before 30 June or after? If you settle on 29 June, you get a full month of interest deduction, GST claim in the June quarter BAS, and a full year of depreciation against the current year. If you settle on 1 July, all those benefits shift into the next financial year. For some tax positions earlier is much better; for others later is.
New asset or used? Both qualify for chattel mortgage financing and both have the same GST treatment. Used assets generally narrow the lender pool but reduce purchase cost.
Pay deposit or finance the full amount? A larger deposit reduces interest paid across the life of the loan but reduces the cash you keep working in the business. The right choice depends on your other cash demands.
A note on tax advice
We are commercial finance brokers, not tax advisers. The patterns above are general; the specific decision for your business needs your accountant to confirm. Where we add value is on the financing side: matching the structure to the lender that prices it best for your situation, and timing settlement to suit your tax outcome.
For complex EOFY purchases, the right rhythm is to talk to your accountant about the tax shape, then to us about the lender shortlist. We are happy to coordinate directly with your accountant on the timing.
Where to from here
We compare chattel mortgage and asset finance across our whole lender panel, and can structure settlement to suit your EOFY timing. You pay us nothing; the lender pays us a commission when your finance settles. Book a 20-minute brief before 30 June to keep the option open.
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