Taking out a chattel mortgage to finance the purchase of a business vehicle is an attractive option for small business owners from a tax-saving perspective. Continue reading to learn more about making use of chattel mortgage tax benefits to finance the purchase of a business vehicle in your small business.
A chattel mortgage is a mortgage on a movable item of property i.e. motor vehicles. A car broker or other finance company lends money to a business to purchase a car, which the business then pays back through regular repayments.
Among the many business car finance options available, a chattel mortgage can provide significant financial advantages for companies, partnerships and sole traders looking to buy a vehicle to be used primarily (50 per cent or more) for their business. The interest rates for chattel mortgages are also generally quite low, as the finance is secured against the purchased vehicle.
While the business takes ownership of the vehicle at the time of purchase, the finance company takes out a mortgage over the vehicle to provide security for the loan.
Chattel mortgages are a viable vehicle financing option for certain businesses, as they can claim any GST paid on the purchased motor vehicle in their business activity statement (BAS). Business owners can also claim depreciation and interest charges on their income tax return.
Other benefits include flexible contract terms ranging from 12 months to five years, fixed interest rates and fixed monthly repayments. Speak to a Taggart & Partners tax financial adviser if you have any questions.