5 min read · Updated . Reviewed by James Rock (National Partnerships Director).
On this page 9
- What is a chattel mortgage?
- How does a chattel mortgage work?
- How is it different from hire purchase or a lease?
- Can you claim the GST on a chattel mortgage?
- What does the lender need from your insurance?
- Why does a fixed premium suit a chattel mortgage?
- Should you add a balloon?
- What are the downsides of a chattel mortgage?
- Financing a machine? Lock in the insurance for the whole loan
What is a chattel mortgage?
The ATO describes it as “a security over chattels (that is, movable articles of property) held by the lender giving the lender recourse against the chattel in the event of default by the borrower”. In plain terms: a loan to buy a machine, where the machine is the security.
“Chattel” just means movable property. For a business that’s usually vehicles, plant and equipment, from excavators and tractors to trailers and forklifts.
How does a chattel mortgage work?
| Step | What happens |
|---|---|
| 1 | You choose the machine and apply for finance |
| 2 | The lender pays the supplier, and you own the machine from the time of purchase |
| 3 | The lender registers its security over the machine on the Personal Property Securities Register (PPSR) |
| 4 | You repay the loan with interest in regular instalments, with an optional balloon at the end |
| 5 | Once the loan is repaid, the lender’s security over the machine ends |
ANZ’s published terms show the shape: “You agree to mortgage the Goods to us until you’ve repaid the loan and complied with all other obligations. We will register a Personal Property Securities registration over the Goods.”
How is it different from hire purchase or a lease?
| Feature | Chattel mortgage | Hire purchase | Lease |
|---|---|---|---|
| Who owns the machine during the term | You | The financier | The leasing company |
| When it becomes yours | From the time of purchase | When you pay the final instalment or exercise the option to buy | Not under the lease itself |
The ATO calls the ownership point “a fundamental difference” between a chattel mortgage and hire purchase. A lease is different again: business.gov.au describes leasing as renting the equipment “from a leasing company that owns them”.
The tax treatment follows ownership. According to business.gov.au, if you buy equipment you may be able to claim the equipment or its depreciation as a tax deduction, and if you lease it, you may be able to claim the leasing costs if it’s used solely for business.
Can you claim the GST on a chattel mortgage?
Generally, yes, and all at once. The ATO says that when a chattel purchased under a chattel mortgage is a creditable acquisition, the purchaser is entitled to “the entire input tax credit” in one tax period: when the invoice is received or a payment is made (for businesses accounting on a non-cash basis), or when the borrowed funds are used to pay for the machine (on a cash basis). You need to hold a tax invoice when you lodge the BAS.
General information from the ATO, not tax advice. Check your position with your accountant.
What does the lender need from your insurance?
Every lender sets its own terms, but ANZ’s published chattel mortgage terms are typical. You agree to:
- Keep the machine insured “at all times during this Mortgage”, so for the whole loan.
- Insure it for “the full insurable value of the Goods against fire, accident and theft and such other risks as the Credit Provider may require”.
- Use a licensed insurer, with the policy in your name as owner and the lender’s name as mortgagee.
- Pay the premiums, and show proof of payment when the lender reasonably asks.
If the machine is damaged or lost, the insurance money goes to the lender, which can use it to repair or replace the machine or to pay down the loan, and must pay any surplus to you. Failing to keep the insurance is itself a default, alongside missed repayments. Before settlement, expect to send a certificate of currency.
Why does a fixed premium suit a chattel mortgage?
The insurance has to run as long as the loan, which for equipment is often several years. A fixed multi-year policy can match that term, from 12 to 60 months, with one premium that doesn’t change at renewal. An annual policy is re-rated every year, and insurance prices paid by Australian households rose 47.9% in the five years to June 2026. Why premiums keep rising.
Should you add a balloon?
A balloon lowers the monthly repayment by leaving a lump sum owing at the end, but it generally raises the total cost. Balloon payments explained, or try the numbers in the equipment finance calculator.
What are the downsides of a chattel mortgage?
Owning the machine from day one is the point of a chattel mortgage, and most of the drawbacks come with that ownership:
- The machine is the lender’s security. business.gov.au makes the point about vehicles: if one secures your loan, “it can be repossessed if you don’t make repayments”. A chattel mortgage over a machine works the same way.
- Repairs and maintenance are yours. As the owner, “you will have to pay for repairs and maintenance unless they are covered by warranty or insurance” (business.gov.au).
- So is the resale risk. For equipment that dates quickly, business.gov.au warns “you might not get much money back if you sell it”, and you “may need to stick with what you bought” rather than handing it back at the end of a lease.
- A balloon costs more overall. It lowers the repayments, but “the total cost of the loan is generally higher” (Moneysmart).
- The insurance runs as long as the loan. Under terms like ANZ’s, letting the cover lapse is a default in its own right, so the premium is a cost for every month of the term.
If you’d rather not own the machine at all, a lease leaves ownership with the leasing company. If you do want to own it, a fixed multi-year premium takes one moving part out of the monthly cost. Try the numbers in our chattel mortgage calculator, which works out the repayment with or without a balloon and adds the insurance for the same term.
Financing a machine? Lock in the insurance for the whole loan
Get your insurance indication in about 90 seconds.
Frequently asked questions
What is a chattel mortgage?
A business loan to buy an asset such as a machine, where the lender holds security over the asset. You own it from the time of purchase.
Who owns the equipment under a chattel mortgage?
You do, from the time of purchase. The lender holds a security interest, registered on the PPSR, until the loan is repaid.
Can I claim GST on a chattel mortgage?
Generally, a GST-registered business can claim the full GST credit in one tax period rather than across the repayments. Check with your accountant.
Do I need insurance for a chattel mortgage?
Yes. Lenders require the equipment insured for the whole loan, at full insurable value, with the lender named on the policy.
What is the difference between a chattel mortgage and hire purchase?
With a chattel mortgage you own the equipment from the start. With hire purchase, the financier owns it until the final instalment or until you exercise the option to buy.
What are the downsides of a chattel mortgage?
The machine is the lender’s security and can be repossessed if you don’t repay; repairs, maintenance and resale risk are yours as the owner; a balloon raises the total cost; and the insurance has to be kept up for the whole loan.
What interest rate is typical for a chattel mortgage?
Each lender sets its own, depending on the business, the machine and the term. As a reference point, the RBA’s average fixed rate on new small business loans was 8.09% in August 2026, across all small business lending rather than equipment finance alone.
Sources
- Australian Taxation Office: GST issues register, Hire purchase agreements and chattel mortgage
- ANZ: Chattel Mortgage Terms and Conditions (02/2025)
- business.gov.au: Leasing or buying vehicles and equipment
- Moneysmart (ASIC): Car loans, balloon payments (updated 24 June 2026)
- Reserve Bank of Australia: Statistical table F7, Business lending rates (published 8 October 2026)
- Australian Bureau of Statistics: Consumer Price Index, insurance (quarterly series to June 2026; monthly release September 2026, published 28 October 2026)
- Product information and approved item list from our specialist insurance partner (August 2026)
General information only, not personal advice. Read the policy wording before you buy.
