The key difference is ownership. With a chattel mortgage, your business owns the vehicle or equipment from day one and the lender holds security over it. With hire purchase, the financier owns it until you make the final payment. That affects how GST, interest and depreciation are treated — your accountant should confirm the treatment for your business before you sign.
What it depends on
The full answer depends on your specific circumstances. Here’s what matters.
Your GST registration and accounting basis
GST-registered businesses may be able to claim GST credits on the purchase, but timing depends on the structure and your accounting method. Confirm with your accountant.
Business-use percentage
Deductions for interest and depreciation are generally limited to the business-use proportion. Mixed-use vehicles need records to support your claim.
Balloon and term
A balloon lowers repayments but leaves a lump sum at the end. Make sure the asset will be worth at least that much.
The last 10%
What a qualified professional can add
The answer above covers the general position. Here’s where professional judgement — applied to YOUR specific situation — makes the difference.
- Matching the finance structure to your tax position and cash flow
- Comparing total cost across lenders including fees and balloons
- Coordinating with your accountant on GST and depreciation timing
Questions to ask before you engage one
If you decide to engage a professional, these questions help you evaluate whether they’re right for your situation.
Who owns the asset during the term, and what happens at the end?
What is the total cost including fees, interest and any balloon?
How and when can I claim GST under this structure?
Are there early payout penalties?
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General Advice Warning
The information on this page is general in nature and does not take into account your personal objectives, financial situation or needs. It is provided by Global Mutual Funds Pty Ltd (ABN 20 090 555 436, AFSL 222640) and should not be relied upon as a substitute for professional advice. Consider whether the information is appropriate before acting on it. Read our Financial Services Guide.