While the equipment does appear on your balance sheet, the full lease payment is tax-deductible with business use. While GST is payable on lease payments over the full term, clients with an ABN can claim back the GST component.
The traditional form of equipment finance, a finance lease, is used when assets are less susceptible to rapid technological change or have extremely long effective lives. For industries and types of equipment more exposed to technological change or where the equipment is business critical, an operating lease (or rental) is usually more appropriate.
Under a finance lease you have full use of the equipment during the term. You have the security of a predictable monthly payment with a known residual at the end of the term. In addition, there is no initial outlay, so you’ll have access to the equipment without the up-front cost.
At the end of the lease term you can take ownership of the equipment simply by paying the stated residual value–no mystery, no hidden fees or costs.
You can update, upgrade or add on equipment at any time without penalty. Once you decide you only need to sign a simple contract variation, often without increasing monthly payments at all.
Save time and money by consolidating all your business’ equipment into a single payment simply by bundling your equipment into the one rental.
An operating lease or rental gives you complete control and flexibility over the acquisition of your business equipment.
Whatever you are looking at financing, Potentia Capital has a soultion.
Rental payments are treated as a 100% tax-deductible expense item when the equipment is used for business purposes.
At the end of the rental term you have a number of choices: you can purchase, continue renting, upgrade or return the equipment–it’s entirely up to you. Most clients choose to constantly upgrade their equipment, allowing them to stay current and competitive while maintaining predictable monthly payments.
A Chattel Mortgage facility can be beneficial to small and medium sized businesses (less than A$1 million p.a. turnover) who account for their GST on a cash basis. Like other equipment finance facilities, you have full use of the equipment during the term. You have the security of a predictable monthly payment, which can be lowered by adjusting either the deposit or the end of term ‘balloon’. Unlike other facilities, however, you have ownership of the equipment from the outset. The lender registers a charge over the equipment (similar to arranging a mortgage on a home).