For over 20 years, we have acted as broker financing all types of Assets. Our team have backgrounds in accounting, legal and banking so we can handle a diversity of situations.
To assist, we do need to understand your financial position. For business owners, this includes a Statement of Financial Position and some supporting information for the business.
Asset Finance Options
There are varied options for funding Assets. All generally allow 100% of the purchase price to be funded (secured by the asset itself) with a fixed term.
The comparisons between these structures is demonstrated below:
|FINANCE TYPE||OWNERSHIP||TAX STATUS||DEPOSIT?||RESIDUAL?|
|Chattel Mortgage||Yes||Claim Interest & Depreciation||Yes||Yes|
|Commercial Hire Purchase||Yes - at end||Claim Interest & Depreciation||Yes||Yes|
|Finance Lease||No||Claim Payment as Tax Deduction||No||Yes|
|Operating Lease||No||Claim Payment as Tax Deduction||No||No|
You take ownership of the asset. The financier takes their interest over it by way of mortgage. Once the contract is completed, the security interest is removed giving the customer clear title to the vehicle.
Potential Benefit – For businesses registered for GST on a cash basis, they may claim back GST in full in their next Activity Statement. Gives certainty of ownership and ability to contribute a deposit.
Commercial Hire Purchase
The financier purchases the asset on behalf of the customer, and then hires it back over an agreed term. After the residual is paid, the customer assumes ownership.
Potential Benefit – Gives some certainty of ownership at end, but generally less tax effective than a Chattel Mortgage option. Not a widespread product option currently.
The financier retains actual ownership of the asset with an option to purchase at the end of the term.
Potential Benefit – A good option if you update equipment or vehicles on a regular basis. The financier retains ownership of the asset, so you only finance the purchase excluding GST. You may also not want ownership for legal or accounting reasons too.
This options means that you will not own the asset. This is commonly referred to as being “Off Balance Sheet” and you can simply return the goods at the end of the term. Generally this structure is delivered at a higher cost.
Potential benefit – An option when you are turning over equipment regularly, need greater flexibility and want one simple repayment.
Finally - Tax
The taxation treatments associated with ownership of equipment can be unique to your personal circumstances. We can support you in getting accounting advice.
For example, this may assess whether the benefits associated with asset ownership of equipment, outweigh any benefits of a full deduction of payments through leasing.