Finance Lease
A finance lease is a rental agreement where the lender purchases the asset (eg motor vehicle, truck, bobcat, etc) on behalf of the customer who in turn pays the lender a fixed monthly rental amount for the term of the lease.
After the final payment (known as the "residual") has been made, the customer takes ownership of the asset.
How does a finance lease work?
The lessor (lender) obtains legal ownership of the asset to be leased, by paying the amount as advised on the supplier's invoice. The lessee (customer) then has the use of the asset and pays rent to the lessor for the term of the lease agreement. Under a lease agreement the lessee is responsible for maintenance, running costs and insurance for the leased asset.
Finance lease features
- Low establishment fees and monthly fees, no payout penalties
- Lease terms range from 1 to 5 years
- Interest rate is fixed for the term
- Lease monthly repayments are fixed for the term
- The lease monthly repayment maybe 100% tax deductible
- GST on the purchase price of the asset is claimed back by the lender on your behalf. This lowers the amount financed to the purchase price minus GST
- GST on the monthly repayments may be claimable on your BAS
Finance Lease taxation implications
The customer is entitled to claim the lease payment on the asset as a tax deduction.
GST will be charged on your monthly payments, however it can be claimed back on your Business Activity Statement (BAS) over the term of the Finance Lease contract.
The monthly repayment and residual amount is subject to GST.
Need further information?
If you require further finance assistance, please do not hesitate to call us on 1300 788 371 or email at info@integratedfinance.com.au.