Prior to the introduction of GST the majority of business loans were leases. Today the tide has turned and the vast majority are now Commercial Hire Purchase (CHP). It all comes down to the "ownership" of the goods and what can be claimed against your tax. Here is an example:

A lease is a rental (the finance company owns the goods) and your repayments should be based on the purchase price less the GST (as the finance company claims the GST as they own the goods) Every monthly re-payment is subject to GST (10% more). Generally the only thing you can claim is the business percentage of the monthly repayment on the loan.

With a CHP, you own the goods and the finance company has a mortgage over the goods (mortgages are not subject to GST and so there's no additional 10% on each repayment). Because you own the goods you could be able to claim 3 different things:

1. The GST included in the purchase price (if you are registered for GST)
2. Depreciation on the car/goods
3. The business percentage usage of the interest charges ie: if the car is used for business 80% of the time, you could claim back 80% of the interest charges you have paid.

An interesting thing to know is that if you sign a lease (even a consumer lease) - when you request a payout figure from the financier, technically - because they own the car - they can make-up a payout figure! In effect, you are asking them "how much will you sell me that car for" because they own it. We have seen someone who was given a payout figure of $35,000.00 from a major car yard financier (which most people would have paid) but because we know how it works, we got that figure down to less than $28,000.00. That's right, a customer was being overcharged for over $7,000.00!!! Be careful!!!

Disclaimer: the above is general advice only, and does not take into consideration your personal circumstances, refer to your accountant for tax advice.

Structuring your repayments for maximum cash flow benefit.

Did you know that your repayments can be structured so that you make a major repayment when you receive a GST rebate for your new car purchase? (For GST registered businesses) This reduces your interest payable and therefore your ongoing repayment. There are other structures which will also suit a farmer purchasing equipment or a PAYG employee receiving a car allowance.

Don't be baffled by the Bull**** at the dealership!

Some new car dealers are just cleaner versions of the old used car dealers - and we all know not to trust them! So when you receive a quote for finance on your new car, ask us for a comparison and look at the repayments. After all, the repayments are the true indicator of what you actually PAY.

Talk to us about the tricks unscrupulous dealers can use to make their finance look attractive - and compare our repayments.

Tip...

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