The chattel mortgage is virtually identical to commercial hire purchase agreement. Key difference lies in ownership and full GST credit can be claimed on purchase on cash accounting.

Unlike the hire purchase agreement where you take ownership of the good at the time of final payment, under a chattel mortgage the financer advances funds to you to purchase a good, and you take ownership of the good at the time of purchase.

Once the contract is completed, the mortgage is removed giving you clear title to the good.

You may want to use the chattel mortgage to acquire business equipment (e.g. motor vehicle used wholly or predominantly for business purpose), because of the following reasons: -

• The finance is secured against the vehicle, allowing lower interest rates. The financier takes a "mortgage" over the vehicle as security for the loan, by registering a Fixed and Floating Charge with ASIC.
• You run a business through the cash method of accounting. You are able to claim back the GST component on the asset right away.

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