| Compare |
Chattel Mortgage |
Leasing |
Novated Leasing |
Hire
Purchase |
| Ownership |
The client retains title to the vehicle/goods and the financier has security over the vehicle/goods until the final payment is received. |
The financier is the owner of the vehicle/equipment and retains ownership for the term of the Lease. At the end of the Lease term, various options are available (See Residual Value – below). |
The financier is the owner of the vehicle/equipment and retains ownership for the term of the Lease. At the end of the Lease term, various options are available (See Residual Value – below). |
The financier is the owner of the vehicle/goods for the term of the agreement. Ownership is then passed on to the Hirer/borrower when the final payment is made. |
| Tax Deductions |
Depreciation and interest charges are normally tax deductible (subject to percentage of business use and current tax law). |
The lease payments, excluding GST, are tax deductible when the vehicle/ equipment is used for business use (subject to current tax law and percentage of business use). |
The Lease payments are made via salary sacrifice by the employer from employee’s gross salary therefore reducing taxable income and overall tax paid. FBT issues apply. |
Depreciation and interest charges are normally tax deductible (subject to percentage of business use and current tax law). |
| Amount Financed |
100% of the invoiced amount.
A deposit can be made to reduce the amount financed
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The amount invoiced less GST.
A deposit cannot be made on vehicles/goods leased.
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The amount invoiced less GST. A deposit cannot be made on vehicles/goods leased. |
100% of the invoiced amount. A deposit can be made to reduce the amount financed. |
Residual
Value /
Balloon Payment |
If your Chattel Mortgage agreement has a Balloon payment still owing at the end of the loan term, you have a number of options.
- Pay the Balloon Payment in full and retain ownership of the vehicle/goods free from encumbrance.
- Refinance the Balloon payment for an additional term.
- Upgrade/replace the vehicle/goods and enter into a new agreement.
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At the end of the lease agreement the financier will normally offer the Lessee a number of options.
- Pay the residual amount in full and gain ownership of the vehicle/goods.
- Refinance the residual amount for an additional term.
Upgrade/replace the vehicle/goods and enter into a new agreement. |
At the end of the lease agreement the financier will normally offer the Lessee a number of options.
- Pay the residual amount in full and gain ownership of the vehicle/goods.
- Refinance the residual amount for an additional term.
Upgrade/replace the vehicle/goods and enter into a new agreement. |
If your Hire Purchase agreement has a Balloon payment still owing at the end of the loan term, you have a number of options.
- Pay the Balloon Payment in full and gain ownership of the vehicle/goods free from encumbrance.
- Refinance the Balloon payment for an additional term.
Upgrade/replace the vehicle/goods and enter into a new agreement. |
| GST Issue |
The Borrower is entitled to claim the GST component of the cash price in their next BAS statement (provided the borrower is GST registered).
The loan payments do not include GST.The balloon payment does not include GST.
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The GST component of the cash price of the vehicle/goods is claimed as an ITC by the financier.
The Lease payments include GST and can be claimed via your BAS statements (provided you are GST registered).
The residual value also includes GST |
The GST component of the cash price of the vehicle/goods is claimed as an ITC by the financier.
The Lease Payments include GST and can be claimed by your employer via their BAS statements. The residual value also includes GST |
The issue of GST claimable items, relating to a Hire Purchase agreement depends on the method of accounting used by the borrower. We suggest you seek advice from your Accountant in order to clarify your position. |
| Conclusion |
This facility has become increasingly popular since the introduction of GST in 2000 and is ideally suited to individuals, partnerships or companies wishing to gain the advantages of claiming the GST on the vehicle/goods purchased up front.
Because the borrower is the owner of the vehicle/goods, depreciation and interest can be claimed as a tax deduction.
Stamp duty is paid at the commencement of this contract.
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Leasing has different advantages for each individual situation.The vehicle/goods are owned by the financier and therefore do not appear on your balance sheet.A Lease agreement can ease the accounting burden on small business by simplifying the calculation of applicable tax deductions.
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A Novated Lease can be an attractive option for many employees.The overall benefits of a Salary Packaged Novated Lease will depend on individual circumstances, including salary level, mileage travelled and the cost of the vehicle.
This transaction may be subject to FBT issues. If you are considering this option you should be travelling a minimum of 15,000 kilometres per annum.
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A Hire Purchase facility is ideal for individuals on car allowance or companies on Accrual Accounting Method (who are able to claim the GST up front).
Depreciation and interest can be claimed over the term of the loan (subject to percentage of business use and current tax law).
Stamp duty is paid at the commencement of this contract.
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If you would like to find out more about these finance options and which is best for your finance requirements please contact us for further information today.
