1. Finance Lease: An agreement whereby the financier owns the goods and you, the lessee, leases these goods from the Financier for a predetermined monthly repayment and term. You must show this lease on your Balance Sheet as an asset with a corresponding liability. Finance Lease Agreements must have a residual or a lump sum, which represents the potential sale price of the goods at the end of the lease term.
At the end of the lease term, you have the following options:
· Re-leasing the residual for another term (subject to terms and conditions);
· Offering to buy the asset, usually for the amount of the residual;
· Trading the asset on a replacement and paying back the supplier any shortfall or keeping any profit.
In most cases, you will be able to claim the full amount of the rentals as tax deductions, provided the goods are used predominantly to earn assessable income.
2.Commercial Hire Purchase: An agreement whereby you, the hirer, hires the goods from the Financier for a predetermined monthly repayment and term. Upon the last payment of the agreement, you obtain full title and become the outright owner of the equipment.
Depending on business usage, the interest portion of the regular repayments and depreciation can be claimed as a tax deductions.
Flexibility of the structure of the Commercial Hire Purchase agreements is an attractive feature. An unlimited amount if deposit can be made by way of cash or trade-in and a choice of either full repayment over the term or a lump sum (balloon) payment at the end of the agreement can reduce the monthly commitment and assist cash flow.
3. Chattel Mortgage: Similar in tax treatment to Commercial Hire Purchase. This product is designed to allow businesses using cash based accounting to claim back the full GST payment in their next BAS return.
4. Lease In Escrow: This product is used for the importation of equipment from overseas and/or the construction of machinery. A documentary letter of credit is issued for the shipment period and upon arrival in
Generally, no collateral security is required. Fees for this transaction are priced on an individual basis with payment required up front.
5. Sale & Leaseback: You may have recently purchased a piece of equipment and paid cash to utilize an attractive discount. We can buy this equipment from you at wriiten down value (but often at price you paid) and lease it back to you, effectively replenishing your cash supplies. Purchases must have taken place in the last 6 months and have been from a licensed dealer in the goods.
6. Operating Lease / Rentals: This product is a pure rental agreement between yourself and the Financier for a predetermined term and monthly repayment.
This product is ideal for the acquisition of IT, Office Equipment Motor Vehicles and Heavy Haulage Vehicles which can become quite obsolete over a number of years. At the end of the rental period you have the option of upgrading to the latest model hence saving on obsolescence and increased maintenance costs.
In most cases, you will be able to claim the full amount of the rentals as tax deductions, provided the goods are used predominantly to earn assessable income.
Other benefits of the Rental Product are:
· Obtain the use of the equipment without having to outlay valuable capital upfront which is conserved for core business requirements.
· Ability to simply update, upgrade or add-on equipment during the term of the contract.
· You will not be locked into owning or disposing obsolete equipment as all the risks associated with the ownership can be taken by the Financier.
· Depending on structure of rental, this product may allow you to keep the transaction Off Balance Sheet
At the end of the rental period you have the following options:
· Upgrade or simply hand the equipment back to the financier with no obligation for the residual value.
· Arrange with the Financier to rent the equipment for a further period.
· Make an offer to purchase the goods from the Financier. Note that the Financier is under no obligation to accept your offer and may request that the good be handed back at the end of the rental period.