Chattel Mortgage in 2025: What Aussie Businesses Need to Know

For many Australian businesses, acquiring new vehicles or equipment is essential for growth—but finding the right finance can be a challenge. Enter the chattel mortgage: a time-tested, tax-friendly lending solution that continues to evolve in 2025. If you’re a business owner or sole trader considering a new work vehicle, understanding how chattel mortgages work—and how recent policy changes affect your bottom line—could save you thousands.

What Is a Chattel Mortgage?

A chattel mortgage is a type of secured business loan, typically used to purchase vehicles or equipment. The asset itself (the ‘chattel’) is owned by the borrower from day one, while the lender registers a mortgage over it as security. Once the loan is repaid, the lender removes the mortgage, and you own the asset outright, free and clear.

Unlike traditional car loans or leases, chattel mortgages are designed for businesses and ABN holders. They offer flexible repayment terms—often from one to five years—and allow for balloon (residual) payments at the end, which can lower monthly outgoings.

• Immediate ownership: The asset is yours from the start

• Flexible structures: Choose fixed or variable rates, set your term, and tailor residuals

• Tax-deductible interest: Interest and depreciation may be deductible for eligible businesses

2025 Policy Updates: What’s New?

This year, several government and industry changes are reshaping the chattel mortgage landscape in Australia:

• Instant Asset Write-Off: The Federal Budget 2024-25 has extended the $20,000 instant asset write-off for eligible small businesses through 30 June 2026. This means businesses with a turnover under $10 million can immediately deduct the cost of vehicles or equipment financed via chattel mortgage, provided each asset costs less than $20,000 (excluding GST).

• GST Credits: Under the current rules, businesses registered for GST can still claim the full GST on the purchase price upfront—often in the BAS period when the asset is acquired. This can significantly boost cash flow in the first year.

• EV Incentives: From 1 July 2025, several states are winding down electric vehicle rebates, but federal fringe benefits tax (FBT) exemptions for eligible EVs under the chattel mortgage structure remain in place. This makes chattel mortgages an attractive option for businesses moving toward greener fleets.

• Responsible Lending: In response to ASIC’s ongoing review, many lenders are tightening documentation requirements, including business income verification and asset usage declarations.

Example: A Sydney-based plumbing company used a chattel mortgage to finance a $39,000 hybrid van. Thanks to the instant asset write-off and GST credit, the business improved its cash flow and reduced taxable income for the year.

Who Benefits Most from Chattel Mortgages?

Chattel mortgages aren’t just for large corporations. They’re popular with:

• Sole traders and partnerships—especially those needing work utes, vans, or specialist equipment

• Small and medium enterprises (SMEs)—keen to optimise tax and cash flow

• Businesses upgrading to EVs—to leverage ongoing FBT exemptions and fleet incentives

Key eligibility criteria in 2025 include:

• Asset must be used primarily (>50%) for business purposes

• Borrower must hold a valid ABN

• Lenders may require evidence of trading history, GST registration, and proof of business income

How to Maximise the Benefits

With the right approach, a chattel mortgage can deliver significant tax and cash flow advantages. Here’s how to get the most out of your deal in 2025:

• Time your purchase: Acquire assets before 30 June to claim deductions in the current financial year

• Consider a balloon payment: Lower your monthly repayments, but ensure you have a plan to pay the residual at the end

• Shop around: Compare lenders for competitive rates, flexible terms, and transparent fees

• Check EV and green asset incentives: If you’re upgrading to low-emission vehicles, ask about special rates or government rebates still on offer

Real-world trend: In 2025, several major banks and fintechs have launched digital chattel mortgage applications, allowing approvals within 48 hours for qualifying business customers. This has sped up asset acquisition for tradies, logistics operators, and consultants alike.