- Why Tax Benefits Matter More Than Ever in 2025
- How a Café Owner Claimed $8,000 Back at Tax Time
- What Is a Chattel Mortgage and Why It’s Treated Differently by the ATO
- The Three Key Tax Benefits You Can Claim in 2025
- Instant Asset Write-Off: What’s Changing This Year
- Business Use Requirements: What the ATO Expects
- Stats: How Many Aussie Businesses Use Asset Finance?
- Common Pitfalls to Avoid
- Your Tax Checklist for Chattel Mortgage Claims
- Make the Most of Your Chattel Mortgage This Tax Season
Why Tax Benefits Matter More Than Ever in 2025
For small business owners, 2025 brings more financial pressure than usual. Asset prices are climbing, margins are tightening, and every dollar counts—especially at tax time. Whether you’re upgrading your work ute, replacing equipment, or financing a delivery van, the way you fund those purchases can significantly affect your end-of-year bottom line.
That’s where a chattel mortgage can make a real difference. While many business owners choose this finance option for its fixed rates and fast approvals, fewer realise the hidden tax benefits that come with it. From claiming back the GST upfront to writing off depreciation and deducting interest, a chattel mortgage isn’t just a way to buy an asset, it’s a smart tool for improving cash flow and reducing tax liability.
In this guide, we’ll walk you through how these benefits work, who can claim them, and what to have ready before you lodge your return. Whether you’re managing a fleet or financing your first tradie vehicle, knowing what to claim could save you thousands.
How a Café Owner Claimed $8,000 Back at Tax Time
When Mia opened her second café on Brisbane’s northside, she knew she’d need a reliable delivery van to manage the extra load—supplies, catering jobs, last-minute stock runs. She financed the van through a chattel mortgage, thinking mainly about keeping repayments steady and predictable. What she didn’t expect was how much she’d get back at tax time.
Because the van was used entirely for business, Mia’s accountant helped her claim the full GST on the purchase price upfront, almost $4,000 back in one go. Over the financial year, she also claimed interest on the loan and depreciation on the vehicle, knocking thousands off her taxable income.
“I honestly thought the only benefit was getting the van without draining our cash,” Mia says. “But at tax time, my accountant showed me how to claim properly—and we ended up $8,000 ahead. It changed how I think about business finance completely.”
The extra cash gave Mia breathing room heading into a slower winter season, helping her invest in marketing without relying on a credit card. It’s a solid example of how understanding the tax treatment of a chattel mortgage can lead to real-world savings, not just on paper, but in your bank balance too.
What Is a Chattel Mortgage and Why It’s Treated Differently by the ATO
A chattel mortgage is a type of business loan that’s secured by the asset you’re purchasing—typically a vehicle, trailer, or piece of equipment. While the lender holds an interest in the asset until the loan is paid off, you’re the legal owner from day one. That ownership makes all the difference when tax time rolls around.
This setup stands apart from leases or hire purchase agreements, where you don’t technically own the asset during the contract period. Because you take ownership up front with a chattel mortgage, the ATO allows you to claim a broader range of tax benefits, including GST on the purchase price, depreciation, and loan interest deductions.
The loan is structured with fixed monthly repayments, which gives business owners the certainty they need to manage cash flow. In some cases, you can also opt for a balloon payment at the end of the term to reduce your monthly outgoings, another reason this finance type is popular among sole traders and SMEs.
MoneySmart offers a helpful comparison of business loan types, noting the flexibility and potential cost savings of a chattel mortgage when used correctly. You can view their breakdown here: MoneySmart – Car Loans Overview.
The Three Key Tax Benefits You Can Claim in 2025
Chattel mortgages aren’t just a financing tool—they’re a tax planning opportunity. If you’re using the asset primarily for business purposes, there are three major tax benefits that can ease pressure at tax time and help you hold onto more of your hard-earned cash.
1. GST on the Purchase Price
If your business is registered for GST, you can typically claim the full GST amount on the purchase price upfront—even though you’re paying the asset off over several years. That’s a significant cash boost early on, particularly for bigger-ticket items like commercial vehicles or machinery.
See more here: ATO – GST and Motor Vehicles
2. Interest Paid on the Loan
The interest portion of your repayments is fully tax-deductible when the asset is used for business more than 50% of the time. This deduction applies annually and should be recorded in your tax return each year, making your repayments work harder for your business.
3. Depreciation of the Asset
Since you own the asset under a chattel mortgage, you’re eligible to claim depreciation based on the ATO’s effective life guidelines. Depending on the asset and the current write-off threshold, you may even qualify for the instant asset write-off, allowing you to deduct the full amount in the year of purchase. Just keep an eye on the 2025 thresholds, they’re subject to change based on turnover and asset cost.
Together, these benefits can significantly reduce your taxable income, putting real money back into your business.
Instant Asset Write-Off: What’s Changing This Year
The instant asset write-off has been a game-changer for small and medium businesses, but in 2025, the rules are shifting again. Under the current arrangement, the write-off threshold is set at $20,000 per asset, and to qualify, your business must have an annual turnover of less than $10 million. The asset must also be first used or installed ready for use between 1 July 2023 and 30 June 2025.
Compared to previous years, when temporary measures pushed the threshold much higher, this cap is tighter. During the height of stimulus programs in 2020 and 2021, some businesses could claim assets worth hundreds of thousands in a single year. That’s no longer the case.
Still, the write-off remains a valuable tool, especially when used with a chattel mortgage. Because you own the asset outright under this finance structure, the ATO allows eligible businesses to claim the write-off even if they’re still paying off the loan. That means you could finance a $19,000 work vehicle today and still write off the entire value in this financial year.
For many business owners, it’s a win-win: maintain cash flow through affordable monthly repayments and still take advantage of a full deduction when it matters most.
Business Use Requirements: What the ATO Expects
To unlock the tax benefits of a chattel mortgage, the ATO has one key condition, the asset must be used more than 50% for business purposes. That applies whether you’re financing a work ute, commercial coffee machine, or delivery trailer. If it doesn’t meet that threshold, you can’t claim GST, depreciation, or interest deductions in full.
For many sole traders and small businesses, there’s often some degree of mixed use. You might use the vehicle for deliveries during the week, but take it for personal errands on the weekend. That’s fine, as long as you can back it up. The ATO allows partial claims, but you’ll need to calculate the percentage of business use and apply that ratio to any deductions.
To stay on the safe side, keep detailed records:
- A logbook showing business vs personal use
- Invoices and receipts that prove how the asset is used
- Your chattel mortgage agreement, showing ownership and loan terms
It’s also worth keeping a running diary of jobs completed or deliveries made using the asset. If the ATO ever asks, having this kind of backup makes it much easier to justify your claims—and avoid any unexpected issues down the track.
Stats: How Many Aussie Businesses Use Asset Finance?
Table: Chattel Mortgage Uptake by Business Size (ABS Data)
| Business Size | Asset Finance Use (2023) | Top Financed Assets |
|---|---|---|
| Sole Traders | 39% | Vans, utes, laptops |
| Small Businesses | 61% | Vehicles, tools, IT gear |
| Medium Enterprises | 72% | Equipment, commercial vehicles |
Source: ABS – Counts of Australian Businesses
Common Pitfalls to Avoid
While a chattel mortgage can deliver solid tax savings, it’s easy to miss out on the benefits if you’re not across the finer details. These common missteps can reduce your return—or land you in hot water with the ATO.
1. Not registering for GST
One of the biggest advantages is the ability to claim GST upfront on the purchase price. But if your business isn’t registered for GST, you won’t be eligible. If your annual turnover is creeping above the $75,000 threshold, it might be time to register, not just for compliance, but to maximise what you can claim.
2. Mixing personal and business use
To access the full range of deductions, the asset needs to be used at least 50% for business. If it’s shared for personal errands or weekend use, keep accurate records (like a logbook) so you can apportion deductions correctly. Without evidence, you may lose out or worse, trigger an audit.
3. Misunderstanding balloon payments
A balloon or residual payment can help reduce monthly outgoings, but it affects how depreciation is calculated. If you write off the full value early, then refinance or trade in the asset, you’ll need to adjust your tax position. Always get advice upfront.
4. Forgetting to track interest paid
Only the interest portion of your repayments is deductible, not the principal. Many business owners forget to request a loan summary from their lender, which can leave deductions on the table.
With the right planning and record keeping, these pitfalls are easy to avoid and the payoff at tax time can be well worth the effort.
Your Tax Checklist for Chattel Mortgage Claims
Claiming the full benefits of a chattel mortgage at tax time isn’t complicated—but it does require having your paperwork in order. A well-prepared file not only speeds up your return but also gives your accountant everything they need to maximise your deductions and keep your claims ATO-compliant.
Here’s a practical checklist to tick off before you lodge:
✔ Asset Invoice Showing GST
Make sure the invoice clearly states the GST amount. This is what you’ll need to claim the full GST credit if your business is registered. If you’ve misplaced it, contact the supplier—you’ll need it on file.
✔ Chattel Mortgage Contract
This confirms the terms of the loan and shows that the asset is owned by your business from day one—essential for depreciation and interest claims.
✔ Proof of Business Use
Logbooks, job diaries, or calendar entries can show how the asset is used. If your usage is mixed (e.g. work and personal), you’ll need to show a breakdown to support partial claims.
✔ Loan Interest Summary from Lender
Ask your lender for an annual summary. Remember, only the interest component of your repayments is deductible, so this breakdown is essential.
✔ Accountant Confirmation on Write-Off Eligibility
Before claiming depreciation or using the instant asset write-off, confirm your eligibility with your accountant. A quick chat could help you avoid errors or missed deductions.
Having these five documents sorted before 30 June can make a big difference, saving you time, stress, and potentially thousands on your return.
Make the Most of Your Chattel Mortgage This Tax Season
If you’re using a chattel mortgage to finance business assets, the tax system is on your side, but only if you know how to claim properly. From upfront GST credits to interest deductions and asset write-offs, the savings can be substantial. What’s more, with tax thresholds and rules shifting in 2025, now’s the time to get ahead of your obligations and make your finance decisions work harder for your business.
With the right records, the right structure, and the right advice, you can turn your chattel mortgage into a genuine tax-time advantage, not just a finance tool.