Motor Vehicle Leasing
For Your on Road Needs
PFP
will review the best options when purchasing motor vehicles.
The most common motor vehicle leases are:
Leasing your motor vehicles doesn't tie up your valuable capital
and repayments can be structured to your budget over a period
of 1 – 5 years. Your taxation advisor should assist you
with the details on planning an effective tax position.
Car Lease
A Car Lease or Finance Lease, enables the borrower to have the
use and benefits of ownership while the lender retains ownership
of the vehicle. At the end of the lease, the borrower can either
pay a ‘residual’ value and take ownership of the
vehicle, trade it in or re-finance the residual and continue
the lease.
No deposit is required. Tax benefits give the borrower the full
benefits of depreciation and interest. GST however is claimed
by the lender, not the borrower. Therefore, amount financed
is pre-GST thereby keeping monthly repayments lower. The borrower
also has the ability to make advance lease payments for tax
deduction purposes.
Commercial Hire Purchase (CHP)
A Commercial Hire Purchase (CHP) is an arrangement where the
lender agrees to purchase a vehicle on behalf of the borrower
and then hires it back to the borrower over a set period of
time. At the end of the contract term when the total price of
the vehicle and interest charges have been paid for in full,
the ownership transfers to the borrower.
Businesses registered for GST using Accrual accounting can claim
the GST as a lump sum on their next Business Activity Statement
(BAS). Businesses using Cash accounting can claim the GST in
installments over the term of the contract.
Novated Lease
A Novated Lease will suit any employee wanting to include a
motor vehicle as part of their salary package, providing the
employer offers salary packaging to their employees. In simple
terms, this lets an employee pay the car loan with pre-taxable
income (salary sacrafice), effectively reducing taxable income.
A Novated Car Lease is a three-way agreement between the lender,
the employer and employee. The contract for finance is between
the employer and the lender.
At the end of the term of the Novated Lease, the employee
has the option to purchase the car for a residual amount,
or the motor vehicle can be traded in or sold.
Types of Novated Leases are a fully maintained car lease
where all the operating costs of the vehicle area covered
by the lender, or a Non Maintained Novated Car Lease where
the employee is responsible for all operating expenses associated
with the vehicle.
Novated Leases are also available for motorbikes, operating
leases and fully maintained Novated Operating Leases.
GST is charged on the monthly lease rental and can be claimed
as an Input Credit by the employer, provided they are registered
for GST. GST is also charged on the residual value on the
lease which becomes the responsibility of the employee when
the Novation Lease reverts back to the employee at the end
of the lease.
Fringe Benefits Tax (FBT) is payable on the vehicle and is generally
passed onto the employee. The amount of FBT depends on the distance
travelled each year. The higher the kilometres, the lower the
FBT.
Chattel Mortgage
Under a chattel mortgage the lender advances funds to the borrower
to purchase a vehicle. The borrower takes ownership of the vehicle
(chattel) at the time of purchase. The lender takes a takes
a mortgage over the vehicle as security for the loan. At the
end of the contract period, the mortgage is removed giving the
borrower clear title to the vehicle.
The main benefit for businesses using Cash accounting is the
ability to claim GST paid on the purchase price of the vehicle
price as an input credit on their next Business Activity Statement
(BAS).
Operating Lease
We can assist you with assistance to make sure you choose the
right type of finance and we look after all the paperwork, letting
you get on with business! So call
Bradley Field now on
0419 252 992
.
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