Buying a ute, a truck or new equipment through your business? The finance usually comes down to a chattel mortgage or a finance lease. On a repayment schedule they can look almost identical. Underneath, they treat ownership, GST and tax very differently. Here's a plain English comparison, current for the 2026/27 financial year.
What is a chattel mortgage?
A chattel mortgage is a business loan to buy a vehicle or piece of equipment. Your business owns the asset from day one, and the lender takes a mortgage over it as security until the loan is repaid. "Chattel" is simply an old word for movable property.
You can usually add an optional balloon: a lump sum at the end of the term that lowers your regular repayments.
What is a finance lease?
With a finance lease, the lender buys the asset and leases it to your business for a set term. The lender owns it the whole time. A residual value is agreed at the start, and at the end you typically pay that residual to take ownership, refinance it, or roll into a new lease. The exact options depend on your lease agreement.
Chattel mortgage vs finance lease at a glance
| Feature | Chattel mortgage | Finance lease |
|---|---|---|
| Who owns the asset | Your business, from day one | The lender, during the lease |
| GST on the price | Claimed as a credit, generally in one go | Built into each lease payment and claimed as you pay |
| Depreciation | Your business claims it | The lender claims it |
| Interest | Generally deductible for the business use portion | Not claimed separately |
| Lease payments | Not applicable | Generally deductible for the business use portion |
| End of term | Optional balloon | Residual set at the start |
| Instant asset write off | Can apply if you're eligible | Doesn't apply to your business |
GST: up front or spread out
Chattel mortgage
Because you're buying the asset, GST is part of the purchase price. If your business is registered for GST, holds a tax invoice and uses the asset to carry on the business, you can generally claim a GST credit for the business use portion.
If you account for GST on an accruals basis, you can claim the full credit in the first period that the invoice is issued or you pay. If you're on a cash basis, you claim it in the period you pay. With a chattel mortgage the supplier is paid in full at settlement, so the credit can usually be claimed in your next BAS. That can give cash flow a welcome lift.
Finance lease
GST is included in each lease payment, and you claim a GST credit on each payment as you make it. The benefit is spread across the term rather than arriving in one hit.
A note on cars and the car limit
For cars, the ATO caps what you can claim. The car limit for 2026/27 is $69,883, so the most GST credit you can claim when you buy a car is $6,353. Depreciation on a car is also worked out on no more than the car limit. With a lease, the GST credits on your lease payments aren't capped at one eleventh of the car limit. Some commercial vehicles are excluded from the car limit, so check how yours is treated with your accountant.
Tax deductions: depreciation and interest vs lease payments
Only the holder of an asset can claim a deduction for its decline in value, which most people call depreciation.
With a chattel mortgage, your business is the holder. You claim depreciation on the business use portion, and the interest on the loan is generally deductible to the extent the asset is used for business.
With a finance lease, the lender holds the asset, so the lender claims the depreciation. Your business generally claims the lease payments as a deduction instead, based on business use.
Neither is automatically better. It depends on your profit, cash flow and other assets, which makes it a great question for your accountant.
The instant asset write off for 2026/27
The $20,000 instant asset write off is now permanent and has been law from 1 July 2026. Small businesses with an aggregated turnover under $10 million can generally deduct the full cost of each eligible asset that costs less than $20,000, in the year it's first used or installed ready for use. The limit applies per asset, so several assets can qualify in the same year. Assets costing $20,000 or more can go into the small business pool, depreciated at 15% in the first year and 30% each year after that.
Because the deduction goes to the holder of the asset, the write off can apply when your business buys with a chattel mortgage. It doesn't apply to your business under a finance lease, because the lender owns the asset.
Balloon or residual: what's the difference?
Both are lump sums at the end of the term that lower your regular repayments.
- Chattel mortgage: the balloon is optional and its size is set by the lender's policy.
- Finance lease on a vehicle: the ATO sets minimum residual values by lease term, from 65.63% of the cost for a one year lease down to 28.13% for a five year lease.
Either way, plan how you'll pay it before you sign.
Which one suits your business?
A chattel mortgage often suits you if:
- you want to own the asset from day one
- you're registered for GST and want the credit up front
- you want to claim depreciation, interest and possibly the instant asset write off.
A finance lease often suits you if:
- you'd rather the lender own the asset
- you're happy to claim GST credits across the term
- you upgrade regularly and like a set residual at the end.
Plenty of businesses use both, choosing the structure asset by asset.
How Lend It helps
We compare 70+ lenders for equipment finance and truck finance, with approvals in as little as 24 hours. If your financials aren't up to date, low doc options are available up to $500k, subject to lender criteria.
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FAQs
Is a chattel mortgage the same as a business car loan?
In most cases, yes. A business car loan is usually a chattel mortgage: the business owns the vehicle and the lender takes security over it.
Can I claim the GST up front on a finance lease?
No. With a finance lease the GST is included in each lease payment, so you claim the credits as you make the payments.
Can I use the instant asset write off with a finance lease?
Generally no, because the lender holds the asset. If your business is eligible, the write off can apply to assets you buy with a chattel mortgage.
Do I need a deposit?
Not always. Many lenders offer no deposit options to established businesses. A deposit or trade in can help newer businesses and larger deals.
Ready to compare?
Tell us what you're buying and we'll lay out both options side by side. Get an equipment finance quote or call 1300 082 012.
General information only. This article is not financial, tax or legal advice and doesn't take your circumstances into account. Talk to your accountant or a licensed adviser before you make a decision. Tax rules are current as at October 2026. Lend It Finance Group is a credit representative (535206) of COG Compliance Services Pty Ltd, Australian Credit Licence 384428.