Lease

A Lease is a rental agreement in which the Bank/Financier owns the equipment, and you indemnify the Bank/Financier for the agreed residual value at the end of the lease term.

 

It is important to note that there is no option for you to purchase the equipment during or at the end of the agreement. Most Banks/Financiers will, however, consider an offer from you to purchase the equipment for the residual value at the end of the term.

A deposit cannot be made to a finance lease. Rental payments are fully tax deductible provided the vehicle/equipment is used to generate assessable income.

 

Payments are subject to GST including the residual due.

Note:We do not purport to provide taxation or legal advice and strongly recommend that you consult your financial or taxation advisor for specific advice.

 

 

 

 

Hire Purchase

A Hire Purchase agreement is an agreement to purchase a vehicle/equipment.

During the term of the Hire Purchase Agreement the Lender/Financier owns the vehicle/equipment. Ownership automatically transfers to the hirer once the final payment is made.

The Hirer has the option to purchase the equipment at any time during the term of the agreement.

Deposits are optional.

The Hirer also has an option as to whether a balloon payment is required or not (to fit in with cash flow budget).

Interest and Depreciation are tax deductible provided you use the vehicle/equipment to generate assessable income.

There is no GST payable on repayments.

Note: (We do not purport to provide taxation or legal advice and strongly recommend that you consult your financial or taxation advisor for specific advice)

 

 

 

 

Chattel Mortgage

A Chattel Mortgage is simply a loan agreement to borrow funds to purchase equipment. Security for the loan is a mortgage over the equipment financed.

A chattel mortgage can provide you with a substantial tax benefit relating to GST and help maximise your cash flow.

E.g. Purchase a new vehicle $60,000 plus GST $6,000 Total $66,000. $66,000 is financed.

Ownership of the goods remains with you and generally the interest component and the depreciation are tax deductible provided you use the equipment to generate assessable income. Generally, if you are registered for GST, the $6,000 GST paid can then be claimed as an input tax credit on your next BAS lodgement.

However, if you report on a cash basis and choose to finance your equipment via a Hire Purchase or Lease, you may not be able to claim the full GST immediately and be required to claim the GST income tax credit over the life of the loan.

Other features of Chattel Mortgages are:

• Flexible repayments options are available

• Choice of paying a deposit or not

• Choose an option with a balloon payment at the end to further assist cash flow throughout the term of the loan

• Fixed interest rates apply, which provides a hedge against possible rate rises.

• No GST on instalments.

• Fund up to 100% of the equipment (including the GST)

Note: (We do not purport to provide taxation or legal advice and strongly recommend that you consult your financial or taxation advisor for specific advice)

The equipment remains with you when the mortgage is discharged or released.

Possible GST advantagesIf GST plays a big part in the equation, a Chattel Mortgage should be considered.