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CHATTEL MORTGAGE
Chattel Mortgage can be used to finance up to 100% of the equipment's value (excluding GST).
If the Borrower has surplus cash this can be used as equity in the equipment to reduce the amount financed
by Komatsu Corporate Finance (the Lender) and hence reduce the Borrower's repayment commitment.
Under a Chattel Mortgage contract the Borrower is the legal owner of the equipment while Komatsu Corporate Finance
has a loan secured against the specific item of equipment being financed.
The loan is secured by a registered mortgage (charge) over the equipment with Komatsu Corporate Finance
noted as mortgagee/chargee and the Borrower noted as mortgagor/chargor.
The term "Chattel" is a legal reference to "goods".
The accounting and taxation treatment of a Chattel Mortgage contract can be summarized as follows:
QUESTION
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ANSWER
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Is it on or off the borrower's balance sheet ?
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On balance sheet
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What portion of the installments are expensed for Australian Accounting Standard purposes?
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The interest component of each installment is expensed.
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What proportion of the installment is tax deductible ?
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The interest component of each installment will generally be tax deductible.
However, the Borrower can also claim depreciation deductions on the equipment.
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Are up front deposits allowable ?
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Yes.
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Must there be a residual value ?
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No. Generally, chattel mortgage's would amortize to zero,
but a bullet payment might be structured as the last payment.
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When is Goods & Services Tax payable ?
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The Borrower must pay all the GST upfront to the equipment supplier.
At the discretion of the Lender, the Lender may or may not finance the GST portion.
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The accounting and taxation treatment of financial products is subject to change. We
strongly recommend that you seek independent advice from your taxation and accounting adviser. Please
refer to the Terms and Conditions of Use of this Web Site.
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