Chattel mortgage (equipment loan) (Bill of Sale)
- ownership of the goods takes place on date of purchase although the financier takes a mortgage over the equipment as security for the loan which is released upon final payment
- allows you to claim the full GST amount in your next BAS claim after purchase, rather than over each monthly repayment.
- may include a balloon payment enabling lower repayments
- interest and depreciation may be deductible for income tax purposes
- security is only taken over the asset itself-your home or property is not involved
Commercial Hire Purchase (Asset purchase)
- equipment is paid for in fixed monthly installments over a set term
- ownership of the equipment is transferred once the final payment has been made.
- may include a balloon payment enabling lower repayments, which can be refinanced at the end of the term
- interest and depreciation may be deductible for income tax purposes
- Other GST implications may now be applicable-contact us for further information.
- security is only taken over the asset itself-your home or property is not involved
Finance Lease
- the financier owns the asset and the client pays a monthly rental over a set term with fixed payments.
- must have a pre-determined residual value which is based on ATO guidelines and is payable at the end of the term.
- lessee can payout the residual value at the end of the lease to gain ownership
- full rental payments may be tax deductible provided you use the equipment to generate assessable income
- security is only taken over the asset itself-your home or property is not involved
Operating Lease (rental)
- perfect for businesses seeking to use the most modern equipment and upgrade to the latest technology while avoiding being stuck with outdated equipment that holds little or no re-sale value
- equipment is rented over a set term. At the end of the rental term it is either returned, upgraded, purchased at market price, or rental of the equipment continues
- may help your company balance sheet as payments don’t show on the balance sheet as a liability, they are treated as an operating expense
- rental payments can be 100% tax deductible on condition the equipment is used to generate assessable income
- amount financed is net of GST, it is charged on monthly repayments instead.
- security is only taken over the asset itself-your home or property is not involved
Fully maintained operating lease
- the main advantage compared to that of an operating lease is that there is the option to include service and maintenance costs associated with renting the equipment
Novated lease
- usually a vehicle financing arrangement made between the employee, employer and financier to provide a car as part of a negotiated salary package
- The customer’s employer pays the rental (and if agreed) the associated running costs of the vehicle direct from the employee’s pre-tax salary, potentially reducing the client’s taxable income.
- provides tax break for the employee while also enabling them to have their car of choice
- if the employee leaves, they are responsible for the vehicle and the repayments
- security is only taken over the asset itself-your home or property is not involved
First 2 Finance Pty Ltd is not an advisory company. Information detailed herein is intended as a guide only. This information does not take into account your financial situation therefore you should seek independent tax and accounting advice before making any decisions
