Commercial Hire Purchase
A Hire purchase contract is a purchase by installment facility providing the hirer legal title to the equipment on completion of meeting all payment obligations contained in the contract.
For tax purposes the hirer is treated as the owner and therefore entitled to claim the depreciation at the appropriate rate plus the interest charges incurred.
Terms can be for periods of one (1) thru seven (7) years generally with fixed installments however, seasonal payments can also be incorporated.
Chattel Mortgage
This is a loan which is secured by the borrower pledging an item of plant or equipment as security.
On completion of the borrowers obligations contained in the loan agreement the lender will then release the mortgage or bill of sale over the item of plant or equipment. The borrower retains ownership of the asset during the term of the contract and is entitled to claim depreciation and interest charges for tax purposes.
Operating Lease
Under an Operating Lease the residual value risk is born by the financier or by a third party under an agreement with the financier. This means that the Lessee merely uses the equipment for the term of the agreement and then returns the equipment to the financier.
The taxation treatment of an Operating Lease is that the rental payments are fully tax deductible. GST is applicable to Operating Leases and is payable on the rental payments.
Operating Lease is used by Lessees who either wish to have the transaction off balance sheet or who have a specific time frame over which they wish to use the equipment. It is a funding mechanism for Lessees who seek to enjoy the use of the equipment without assuming the rights and obligations of ownership.
Traditionally it is used to fund mining equipment for a project of finite mine life, for fleets of on-road trucks on a fixed contract period, motor vehicle fleets and IT equipment.
Allied Finance is a leader in the implementation of operating leases and comprehensively understands the documentation requirements for such programmes.
Finance Lease
Finance lease remains a cost effective way to acquire income producing assets.
As with an operating lease title to the equipment remains with the lessor and as a consequence the lessee for tax purposes is able to claim the payments as an operating expense.
Financing costs are calculated on the full price of the equipment for an agreed term.
Frequency and timing of payments can also be negotiated to suit specific needs.
Other specialty products include: Rental Programmes, Novated Leases, Consumer Mortgages.
