If you’re in the hospo business and looking to pivot into deliveries or just need a set of wheels to pick things up from suppliers, you may be wondering if you’re even eligible – especially if you’ve been weathering the storms of lockdowns and reduced capacities. If you are self-employed, a sole trader or small business owner and intend to use your car for work over 50% of the time, you can consider taking out an ABN car loan such as a chattel mortgage or hire purchase.
Chattel mortgages and business car finance
Chattel mortgages and hire purchases are best for business or ABN holders who intend to use their car a majority of the time for business purposes. Both types of loans function in the same way but differ in where ownership of the car lies – a chattel mortgage means ownership rests with you; a hire purchase has it lie with the lender. (It all depends on how you do your accounting – ask your accountant for more information.)
Chattel mortgages allow you to claim the GST on the purchase, interest paid on your repayments; or your lender claims it as part of a hire purchase. You can also claim the tax breaks on depreciation up to the depreciation limit.
Chattel mortgages are a type of secured car loan, which means that banks and lenders will give you a lower-than-normal interest rate as the car is put up as collateral.
Cash flow neutral
Savvy Managing Director and finance expert Bill Tsouvalas says that a chattel mortgage is also cash flow neutral, meaning you won’t need a deposit to start. “You can borrow more than the cost of the car so you won’t be out of pocket for insurance or registration,” he says. “You can also claim the instant asset tax write-off, which makes it even better suited for business.”
Claiming car expenses
If you are buying a car for work, you need to keep a logbook to show the tax office you are using your car 50% of the time or over for business purposes. “This can also save you during tax time, as you will need to show the Tax Office the maths if you claim by the cents per kilometre method,” Tsouvalas says. For more tips on tax, read our blog here.
SME Recovery Loans
The federal government has extended its SME Recovery Loan guarantee scheme, which offers a guarantee of 80% of a loan amount and a repayment holiday of up to 24 months. Your business will have to prove it was financially affected by COVID-19 lockdowns. You can apply for loans up until the 31st of December 2021.
If you are in business and need a car, there are solutions in the form of chattel mortgages and hire purchase options. Remember to consult your accountant to determine which product is best for you. “Also approach a broker instead of your bank,” Tsouvalas says. “More options mean more competition for your business – and you could save a bit of money.”