A Chattel Mortgage can provide cash flow benefits for businesses. With a Chattel Mortgage (also known as a Commercial Loan Agreement), the customer claims depreciation and interest as tax deductions on the equipment. The major advantage of a Chattel Mortgage is for businesses who account for GST on a cash basis. Under the Chattel Mortgage agreement, the business may claim back the GST paid on an asset in their next BAS statement, thereby maximising cash flow potential.
Tax Benefits: The tax benefits in using a Chattel Mortgage can be quite significant. For example, anyone who accounts on a cash basis may claim the GST component back in their next BAS statement. This can benefit a client in two ways. The amount claimed back can be put back into the loan, reducing the amount borrowed, and therefore reducing the payments; or the client may keep the amount claimed to assist with cash flow. Check with your accountant for advice on which scenario would better assist your business situation.
Under a Chattel Mortgage, the interest and depreciation are claimed as expenses.
Term: A chattel mortgage may be taken over a term of 1-5 years, subject to credit approval of the term. (Term may have to be shorter for older goods or if the amount borrowed is small.)
Interest Rate: The interest rate will vary from lender to lender; we can offer our clients the best rate for each individual situation. Once the contract is established, the rate is fixed for the life of the contract.
Establishment Fee: This will vary from lender to lender, and may range from no establishment fee, up to $350.00. (In many cases the establishment fee does not have to be paid up front, and may be added to the amount borrowed.) Other fees and charges may also be applicable with a Chattel Mortgage; if written in the name of a Company, the Mortgage may need to be lodged with ASIC, and a lodgement fee of $135.00 may apply. There may also be a private sale fee if the vendor of the goods you are purchasing is not a trader of those goods normally, or in the case of a vehicle, an LMCT dealer. We will make you aware of any up front charges when you make your enquiries.
Residuals: A Chattel Mortgage can offer great flexibility in the amount you may have as a residual. Depending on the term and the goods, residuals of up to 50% or higher of the amount borrowed may be possible. The advantage in choosing your residual is the ability to tailor your payments to suit your budget.
Early Payout Fees: If you decide to pay out your loan before the end of the term, the lender will rebate the majority of the interest remaining on the loan. The portion not rebated is considered an early payout fee. This percentage charged varies from lender to lender; please enquire as to discounts offered.
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Asset Lease Australia specialising in Commercial Finance.