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  • 1.20. How does a chattel mortgage arrangement differ from a hire purchase agreement?


    Under a chattel mortgage, the purchaser takes title in the chattel from the time of purchase. The purchaser (the borrower) finances the purchase price (or part thereof) of the chattel by way of a loan, obtained from a lender, and applies the borrowed funds as payment to the supplier for the chattel.

    A hire purchase agreement is a contract for the hire of goods where the title in the goods remains with the financier and does not pass to the purchaser until either the option to purchase is exercised by the purchaser, or the final instalment is paid. This is a fundamental difference between a chattel mortgage arrangement and a hire purchase agreement.

    For GST purposes, hire purchase has the meaning given by section 995-1 of the Income Tax Assessment Act 1997 (ITAA 1997). Refer to Issue 1.1 above for the definition of hire purchase.

      Last modified: 01 Apr 2019QC 16359