Myfleet Chattel Mortgage
Since the tax office changes to the treatment of GST on a Commercial Hire Purchase the Chattel Mortgage represents a new trend in individual and small business financing for motor vehicles both passenger and commercial, as well as plant, equipment and other assets.
The concept, structure and repayment scenario is the same as a CHP in that it is simply a loan and repayment finance arrangement with a balloon at end of term. The fundamental financial difference between a Chattel Mortgage and a CHP is that there is no GST in the repayments for a Chattel Mortgage.
What is a Chattel Mortgage?
A Chattel Mortgage is a straight forward loan and fixed repayment scenario typically with a balloon (lump sum) payout at the end of the loan period. The idea of structuring a loan like this is to help preserve the cash flow and keep month-to-month payments to a minimum allowing investment in other areas of the business.
The balloon payment at end of the loan period is set by the customer, and can be zero or any value up to the likely market value of the asset at end of the loan period. The higher the balloon is set the lower the repayment value and vice-versa. The loan period will typically range up to 60 months but can be longer depending on the type of asset being purchased. The length of the loan period selected will affect the repayment amounts.
From a tax perspective the usual rules of depreciation and deductions apply in the same way as if you owned the vehicle.
