Finance Lease

A Finance Lease is a contract where the Lender purchases the equipment and leases to you for an agreed term and rental. Tax deductions are available for the lease rental payments, while the Lender providing the lease retains ownership of the item, and is able to claim depreciation.

A residual amount is assigned to the lease according to taxation guidelines, which is based on the useful life of the asset. At the end of the lease period, the Lender owns the equipment and may choose to sell it in the open market. Most businesses end up acquiring the equipment themselves.

How does a Finance Lease work?

The Lender purchases the equipment on behalf of the customer, who then leases the asset back from the Lender and pays a fixed monthly lease rental for the term of the lease.

At the end of the lease the customer can either pay a residual value (final instalment) on the lease and take ownership of the equipment, trade it in or re-finance the residual and continue the lease.

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Who does a Finance Lease suit?

Finance Leasing is suitable for companies, partnerships, sole traders and individuals where the leased asset is used for income producing purposes. It is also ideal for employees who want to salary package a vehicle through a Novated Lease as part of their remuneration.

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Tax implications of a Finance Lease

GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the customer is registered for GST, they can claim some or all of the GST contained in the lease rental and the residual value as an input credit on their next Business Activity Statement.

Where the amount financed is below the Depreciation Limit the customer claims the lease rental as a tax deduction. Above the Depreciation Limit, interest charges on the lease and depreciation up to the value of the Depreciation Limit can be claimed.

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Key Features

  • 100% of financing
  • GST is not included in the amount financed but paid and claimed by the financier
  • Total Monthly Repayments are fully tax deductible
  • The Residual Value is fixed and is agreed between the financier and you and is subject to Australian Taxation Office guidelines
  • Payments may be structured – including irregular or seasonal payments
  • Finance term up to 7 years
  • Structure and term generally matched to meet useful life of the asset
  • Rentals are fixed for the life of the lease
  • The rentals and the residual value attract GST.

Key Benefits

  • Preserves your working capital
  • Rentals are tax deductible
  • Fixed payments means cash flow is easy to manage.

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