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CAR LOANS for business use
Commercial Hire Purchase (CHP) A CHP is generally suitable for businesses using the "accruals" method of accounting for GST, or for individuals who used their motor vehicle for business related purposes. Under the "accruals" method, the GST component of the purchase price of the motor vehicle (or other asset) can be claimed back on the next BAS, rather than claiming the GST over the term of the finance contract. CHP is a rental agreement, however it differs from a Finance Lease in that the goods automatically become yours once the terms of the agreement have been completed. The Financier maintains ownership of the vehicle or equipment until the final payment is made, however for tax purposes you can claim depreciation and the interest component of the monthly rental as a monthly business expense. GST is not payable on the monthly CHP repayments. Also, as distinct from a Finance Lease, you have the option of including an upfront deposit or trade-in to reduce your monthly rental, while a balloon payment may also be set at the end of the term (similar to a Finance Lease residual payment). Alternatively, you may choose to structure your rentals to clear the debt in full over the full term of your agreement. You should seek the advice of your accountant as to the better method of financing an acquisition within the books of your business, however Take Credit is happy to discuss different repayment schedules to suit your needs. Application process - click here Chattel Mortgage A Chattel Mortgage is essentially a charge over goods to be financed. A Chattel Mortgage allows businesses to operate under a "cash accounting" basis to claim the full input tax credit from GST incurred expenses immediately. Payments can be structured in the same manner as a CHP or Finance Lease. Application process -click here Finance Lease A Finance Lease is an attractive finance option for sole proprietors, partnerships and companies that use the "cash" method of accounting for GST. Under the cash method, the vehicle is financed excluding the GST component of the purchase price of the motor vehicle (or other asset) that is claimed back by the financier. In this manner, the amount financed excludes the GST, thereby reducing the amount borrowed. At the same time, GST is then charged on your monthly payments, which can be claimed back on the next BAS over the period of the finance contract. GST is also payable on the residual value, at the end of the lease. Where the vehicle is used for business purposes, the monthly lease rental will be tax deductible. The extent of the tax deductibility will depend on individual circumstances (in regard to the percentage of business use etc.) and advice should be sought from your accountant in this regard. Ownership of the vehicle, or equipment, remains with the Lessor and the Lessee (you or your company) assumes the risk of the residual value. At the end of the lease the lessee has the option of: 1. Returning the vehicle to the lessor (and make up any shortfall, should the sale of the vehicle or equipment not be sufficient to cover the residual value) 2. Paying out the residual and obtain ownership of the vehicle 3. Refinancing the residual for another lease or CHP term. A Finance Lease does not appear on the lessee's balance sheet and thereby does not necessarily impact on leverage considerations for future borrowings, although a notation to the effect of a "Contingent Liability" is usually shown the company's financial statements. Application process -click here Novated Lease for business use vehicles Many larger companies will elect to supply business use vehicles to their employees, by way of a Novated Lease arrangement, rather than by supplying a company owned and operated vehicle. A Novated Lease is effectively a three way agreement between the employee (as lessee), their employer and the Finance Company (the lessor). The employee leases the vehicle (on a Finance Lease basis), directly from the Finance Company and the employer agrees to make all payments via a Novated Deed through the employee's salary packaging. A fully maintained Novated Lease is an arrangement where all of the operating costs (such as lease rental, servicing and maintenance, registration, tyres and insurance) of the motor vehicle are covered by a single monthly payment made by the lessee (via their salary package scheme) to the Finance Company. The Finance Company takes care of all maintenance and administration costs of the motor vehicle. Take Credit will arrange the full package for you if required. Application process -click here MOTOR VEHICLES FOR PERSONAL USE - click here - MOTOR VEHICLES FOR PROFESSIONAL USE - click here - |
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