Commercial Hire Purchase is an agreement to purchase a car / vehicle subject to payment terms to the finance company. You will automatically own the goods when you pay the final payment, different to a car lease.
The term of finance agreement can be from 1 - 5 years and deposits are not required. Deposits are not required.
You can choose to have a balloon payment as the last payment of your finance agreement. This balloon payment is usually between 10% - 40% of the cost price, but may be as low as one dollar, dependent upon the equipment.
The financier retains legal title of the car during the term of the agreement. You automatically secure ownership upon payment of the final installment.
With a hire purchase arrangement, the GST liability arises at the commencement of the agreement. Even though the total amount payable under the agreement will be paid by periodic installments and ownership of the equipment will not pass to the hirer until the final repayment. The financier, being the supplier, is responsible for the payment of the GST liability.
Therefore the amount financed is inclusive of GST, and your monthly repayments are not subject to GST unless you are on a cash basis for GST. (Seek advice from your accountant). You can claim the interest component of all repayments. The depreciation of the goods is fully tax deductible providing goods are used 100% for business purposes. |
