An Asset Lease enables the customer to have the use of their business equipment and the benefits of ownership, while the financier retains actual ownership of the equipment.
How does it work?
The financier purchases the equipment on behalf of the customer, who then pays the financier a fixed monthly lease rental for the term of the lease.
At the end of the lease the customer can either pay a residual on the lease and take ownership of the equipment, sell the equipment or re-finance the residual and continue the lease.
Benefits of an Asset Lease
- Flexible contract terms
- Fixed interest rates
- Fixed monthly lease rentals
- Costs are known in advance
- A residual can be applied to a lease, lowering monthly payments
- Your equipment does not sit "on your books" as an asset/liability
- Tax deductions for the lease payments can be claimed
- As the GST contained in the vehicle's purchase price is claimed back by the financier, only the equipment's price exclusive of GST is financed, lowering monthly payments
- Ability to make advance lease payments for tax deduction or cash-flow purposes
Tax implications of an Asset Lease
GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the customer is registered for GST, they can claim some or all of the GST contained in the lease rental and the residual value as an input credit on their next Business Activity Statement.
The customer can claim the lease rentals as a tax deduction.
If you are considering an Asset Lease, you may also want to take a look at Commercial Hire Purchase,
Chattel Mortgage and Equipment Rental as other possible finance options.
Want to know more?
Call us on (03) 9888 9292 and we will be happy to discuss your options with you.