Get professional tax advice for your chattel mortgage
If you need to buy a vehicle that will be predominately used for your business, then you have a number of finance options. Each of these options has its own advantages and disadvantages.
One of your options is a chattel mortgage. These can be used to purchase cars and other movable equipment for business purposes. There are many advantages to a chattel mortgage, including flexibility and potential tax deductions.
Keep reading for more information about chattel mortgages.
Please note: All information provided here is of a general nature and is not intended as advice for your personal circumstances. Consult a financial professional for advice on whether or not a chattel mortgage is right for your business.
What is a chattel mortgage?
A chattel mortgage is a form of car finance that can be used to purchase vehicles for commercial purposes.
Under the terms of a chattel mortgage, you will have ownership of the vehicle from the time that it is purchased, and the lender has a security charge over the vehicle in the form of a mortgage.
When you purchase a vehicle with a chattel mortgage, Goods and Services Tax (GST) is charged on the purchase price, but not on the regular repayments or the 'balloon' payment. This makes chattel mortgages popular for businesses with the ability to account for GST, either on a cash or accruals basis.
Other benefits of a chattel mortgage include:
- Flexible loan terms and repayments, including seasonal repayments
- 100% finance is possible
- Fixed interest rates
- Potential tax benefits
Tax benefits of a chattel mortgage
There are potential tax deductions that you could make if you finance your commercial vehicle with a chattel mortgage. These include:
Tax deductions for interest payments – You may be able to claim the interest payments on your chattel mortgage as a tax deduction. If you are eligible, you can claim the interest charges on your next annual tax return.
Tax deductions for depreciation – You may also be able to claim the depreciation of the vehicle value as a tax deduction. Consult a tax professional to find out about the current depreciation limit and the requirements of the Australian Tax Office (ATO).
GST on the initial purchase – It could also be possible to claim the GST paid on the initial purchase of the vehicle as an Input Tax Credit. This requires your business to be registered to collect Federal Government GST and is done on your BAS.
Always consult a tax professional to receive advice on which tax deductions you are and are not eligible for.
Is a chattel mortgage right for your business?
There is a range of business car loans that you can choose from. The one that best suits your needs will depend on your circumstances and preferences.
There are many benefits of getting a chattel mortgage, including flexible loan options and potential tax benefits. If you are considering a chattel mortgage to make savings on your tax return, make sure you seek advice from a tax professional.
At Rapid Finance, we are experts in business car loans. Our finance specialists could help you consider your options so that you get a business car loan that suits the needs of you and your business.
If you're ready to get your business car loan, enquire about a chattel mortgage with Rapid Finance.