Vehicle & Equipment Finance
Accountants Referral Service
We also offer accountants a vehicle and equipment finance referral service. You simply refer your clients for finance (chattel mortgage, lease etc.) and we offer your client the best finance deal available from our panel of lenders. We liaise with you and make sure the finance is structured for maximum tax effect.
We reward accountants for their client referral based on the price of the asset being financed and work with more than 2000 accounting firms from all over Australia.
David Jakimiuk heads our vehicle and equipment finance division and as part of the Money Resources Group we can offer you and your clients heavily discounted rates of finance. You and your clients can also access fleet pricing when purchasing new cars and light commercial vans that could potentially save thousands of dollars.
As you know, there are a number of different methods of financing vehicles and equipment including a chattel mortgage, lease, novated lease and commercial hire purchase. Each of these alternative finance methods has varying taxation, profit and cash flow implications plus there could also be important GST and FBT considerations. For this reason we liaise with our referring accountants to ensure:
- Your clients get the most tax effective advice
- The finance is structured so clients can potentially claim back any upfront GST with their next BAS
For more information or a finance quote call David Jakimiuk today on (03) 9824 5300. -You can also download our newsletter dedicated to vehicle and equipment finance titled 'Finance Matters' ->
Listed below are brief explanations of the various finance options together with their benefits and tax consequences.
Listed below are brief explanations of the various finance options together with their benefits and tax consequences.
Chattel Mortgage
A Chattel Mortgage is an attractive finance option for sole proprietors, partnerships and companies that use the 'cash' method of accounting for the Goods and Services Tax (GST). Under the cash method, the GST component of the acquisition price of the motor vehicle (or other asset) can be claimed back on the entity's next Business Activity Statement, rather than claiming the GST over the term of the finance contract.
Flexibility of Chattel Mortgage
Flexibility is an attractive feature of a Chattel Mortgage. You can choose to finance the total purchase price, or use a deposit or trade-in to reduce the loan repayments. You can even use the GST refund to contribute towards paying off the loan, thereby reducing the amount financed and the interest paid over the term of the loan.
Flexibility is an attractive feature of a Chattel Mortgage. You can choose to finance the total purchase price, or use a deposit or trade-in to reduce the loan repayments. You can even use the GST refund to contribute towards paying off the loan, thereby reducing the amount financed and the interest paid over the term of the loan.
Tax Benefits of Chattel Mortgage
By choosing a Chattel Mortgage, you become owner of the motor vehicle while the financier secures a charge over the asset. As you are the owner of the motor vehicle you may claim a tax deduction for the depreciation on the motor vehicle as well as the interest component of the loan repayments.
By choosing a Chattel Mortgage, you become owner of the motor vehicle while the financier secures a charge over the asset. As you are the owner of the motor vehicle you may claim a tax deduction for the depreciation on the motor vehicle as well as the interest component of the loan repayments.
In addition, GST is not payable on the loan repayments.
Other Benefits
- The repayments are fixed over the term of the loan
- The term of the loan can range from 12 months to 60 months
- You can structure the repayments with or without a balloon payment at the end of the term so you can tailor your repayments to suit your cash flow
- There is no GST payable on the balloon payment (if any) at the end of the contract
Commercial Hire Purchase (CHP)
A Commercial Hire Purchase (CHP) is generally suitable for entities using the 'accruals' method of accounting for the Goods and Services Tax (GST) or for individuals who use their motor vehicle for business related purposes. Under the 'accruals' method, the GST component of the acquisition price of the motor vehicle (or other asset) can be claimed back on the entity's next Business Activity Statement, rather than claiming the GST over the term of the finance contract.
Flexibility of Commercial Hire Purchase
Flexibility is an attractive feature of a Commercial Hire Purchase. You can either finance the total purchase price, or use a deposit or trade-in to reduce the loan repayments. You can even use the GST refund to contribute towards paying off the loan thereby reducing the amount financed and the interest paid over the term of the loan.
Tax Benefits of Commercial Hire Purchase
Unlike a Chattel Mortgage, with a Commercial Hire Purchase arrangement you do not become owner of the motor vehicle (or asset) until all monies owed under the arrangement are paid. However, you can still claim a tax deduction for the depreciation on the motor vehicle as well as the interest component of the loan repayments where the motor vehicle is used for business related purposes.
In addition, GST is not payable on the Commerical Hire Purchase repayments.
Other Benefits
- The repayments are fixed over the term of the Commercial Hire Purchase
- The term of the loan can range from 12 months to 60 months
- You can structure the repayments with or without a balloon payment at the end of the term of the Hire Purchase to tailor your repayments to suit your cash flow
- There is no GST payable on the balloon payment (if any) at the end of the contract
Finance Lease
A Finance Lease is an attractive finance option for sole proprietors, partnerships and companies that use the 'cash' method of accounting for the Goods and Services Tax (GST). Under the cash method, the vehicle is financed excluding the GST component of the acquisition price of the motor vehicle (or other asset) that is claimed back by the financier. This means you are financing the ex GST price, reducing the amount borrowed. However GST is then charged on your monthly payments which can be claimed back on the entity's next Business Activity Statement over the term of the finance contract.
During the term of the lease agreement the lessee pays the rental and does not obtain ownership or equity in the vehicle. The lessor retains ownership of the vehicle, while the lessee assumes the risk of the residual value. At the end of the lease the lessee has the option of:
During the term of the lease agreement the lessee pays the rental and does not obtain ownership or equity in the vehicle. The lessor retains ownership of the vehicle, while the lessee assumes the risk of the residual value. At the end of the lease the lessee has the option of:
- Returning the vehicle to the lessor (and make up any shortfall in the residual that may occur)
- Offer to pay out the residual and obtain ownership of the vehicle
- Refinancing the residual for another lease term
Under a finance lease, the lessee is responsible for all maintenance and running costs of the vehicle. Finance lease rentals are subject to GST, as is the residual value of the motor vehicle.
Flexibility of a Finance Lease
A finance lease allows the lessee to select a lease term and repayments to suit their cash flow. Lease rentals and residual values can be negotiated within a range set out under ATO guidelines.
Tax Benefits of a Finance Lease
Where the vehicle is used for business purposes, the lease rental will be tax deductible. The extent of the tax deductibility will depend on the business percentage of use and whether or not the motor vehicle cost price exceeds the Luxury Car limit ($61,884 in 2014/2015). The lessee (where registered for GST) will be entitled to claim back the GST paid on the lease rentals.
Other Benefits
- There is no initial outlay required from the lessee as finance is for 100% of the value of the vehicle
- The term of the loan ranges from 12 months to 60 months
Consumer Car Loan
A Consumer Car Loan is typically used by individuals to purchase a car where it is predominately for personal or private purposes and it does not form part of any salary packaging arrangement. With car loans, the car is the security against the funds borrowed to acquire the car. As the financier holds the car as security, their risk of loss is reduced, and as such a much more competitive interest rate can be offered than for standard personal loans.
Benefits
- Repayments are fixed for the period of the loan
- In general, the interest rate on a personal car loan is significantly less than standard personal loans
- You can finance the total purchase price of the car
- Compared to a adding the vehicle to an existing mortgage, a consumer car loan ensures you make regular payments over a period of 12-60 months, instead of spreading your vehicle repayments over the life of a home loan, for a period as long as 30 years. Avoiding this can save you thousands of dollars
Novated Lease
A Novated Lease is a 3-way arrangement between the employee, the employer and the financier. The lease payments are transferred from the employee to the employer through a Deed of Novation, and the employer assumes responsibility for making the lease payments to the financier. The Deed of Novation remains in force until the earlier of the end of the lease term, or until the employee ceases employment.
A Fully Maintained Novated Lease is an arrangement where all of the operating costs of the motor vehicle are included as part of your salary package.
A Fully Maintained Novated Lease is an arrangement where all of the operating costs of the motor vehicle are included as part of your salary package.
Operating costs that can be packaged include:
- Lease Rental
- Fuel & Oil
- Servicing and Maintenance
- Registration
- Tyres
- Comprehensive Insurance
- Roadside Assistance
Under a Non-Maintained Novated Lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.
Benefits of a Novated Lease
- The employee can lease the motor vehicle of their choice
- The motor vehicle can be leased where the private use of the vehicle is 100%
- When an employee ceases employment, the responsibility for the lease reverts back to the employee
- The motor vehicle does not appear on the employer's Balance Sheet
Tax Benefits of a Novated Lease
The concept of novated leasing is central to salary packaging arrangements between an employee and an employer. Under a salary packaging arrangement, an employee agrees to forego a portion of their salary or wages in return for benefits equal to that amount. For a novated lease, the lease and running costs of the motor vehicle, and fringe benefits tax (if applicable) are deducted from the employee's pre-tax salary, and PAYG is calculated on the reduced salary or wages. Depending on the employee's individual financial circumstances, salary packaging a motor vehicle under a novated lease can have the effect of increasing an employee's net disposable income.
Other Benefits of a Novated Lease
- The repayments are fixed over the term of the loan.
- The term of the novated lease ranges from 12 months to 60 months
- As the financier is the owner of the motor vehicle, they claim the GST on the purchase price, meaning that the employee finances the GST-exclusive amount
- Under a salary packaging arrangement, the employer is entitled to claim an input tax credit for the GST components of the lease payments and other running costs of the motor vehicle
- If the employer passes back to the employee the input tax credits, the employee is effectively paying the novated lease and running costs net of GST
Operating Lease
An Operating Lease is an arrangement where the lessee agrees to lease the motor vehicle for a predetermined period, and at the end of the term the motor vehicle is handed back to the leasing company. The leasing company assumes the risk with regards to the residual value of the motor vehicle at the end of the lease. The rental payments for the operating lease are fixed for the term of the lease.
The operating lease agreement will provide for a maximum number of kilometres that can be travelled by the motor vehicle during the lease term. If the maximum number of kilometres is exceeded by the lessee, an excess kilometre charge will be payable by the lessee to the leasing company.
The motor vehicle must be returned to the leasing company at the end of the lease in good order and condition. Depending on the type of repairs to be made to the motor vehicle upon return (if any), the lessee may be required to pay the cost of those repairs.
The lessee has the option of choosing a fully maintained or non-maintained operating lease.
Fully Maintained Operating Lease
A fully maintained operating lease is an arrangement where all of the operating costs (such as lease rental, servicing and maintenance, registration and tyres) of the motor vehicle are covered by a single monthly payment made by the lessee to the leasing company. The leasing company takes care of all maintenance and administration costs of the motor vehicle.
The operating lease agreement will provide for a maximum number of kilometres that can be travelled by the motor vehicle during the lease term. If the maximum number of kilometres is exceeded by the lessee, an excess kilometre charge will be payable by the lessee to the leasing company.
The motor vehicle must be returned to the leasing company at the end of the lease in good order and condition. Depending on the type of repairs to be made to the motor vehicle upon return (if any), the lessee may be required to pay the cost of those repairs.
The lessee has the option of choosing a fully maintained or non-maintained operating lease.
Fully Maintained Operating Lease
A fully maintained operating lease is an arrangement where all of the operating costs (such as lease rental, servicing and maintenance, registration and tyres) of the motor vehicle are covered by a single monthly payment made by the lessee to the leasing company. The leasing company takes care of all maintenance and administration costs of the motor vehicle.
Non Maintained Operating Lease
Under a non-maintained operating lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.
Under a non-maintained operating lease the lessee is responsible for all maintenance and other running costs of the motor vehicle.
Benefits of an Operating Lease
- The rental payments are fixed over the term of the lease
- The financier assumes the residual value risk on the vehicle
- The motor vehicle does not appear on the balance sheet
- Operating costs can be included in a single payment.
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9 Jun '21
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