03 9568 2654
113 Poath Rd, Murrumbeena VIC 3163
PO Box 5005, Hughesdale VIC 3166
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Motor & Equipment Finance
Five Star Mortgage Solutions is able to assist with sourcing finance products for the purchase of business and personal vehicles and equipment.
Some things need to be considered when deciding which type of finance is the best solution:
- How long the asset is to be used?
- How old is the asset?
- Is the asset to be used as security for the loan?
- Is the asset for business or personal use?
- What is the preference when it comes to asset ownership?
Assets that can be financed include:
- Motor cars.
- Commercial vehicles - trucks, trailers, vans & buses.
- Engineering equipment (e.g. Lathes).
- Earthmoving and agricultural equipment.
- Medical and dental equipment
- Office equipment.
- General business equipment.
Sometimes - specialised equipment, sale and lease back transactions, fixtures and fittings, computer systems and other "low value" types of equipment such as furniture.
The information in this website is not accounting or tax advice. Readers are required to seek their own professional advice on all accounting and tax issues prior to deciding on the most appropriate course of action or product. Refer to www.ato.gov.au/businesses to confirm current taxation information.
Finance Lease
A finance lease is a rental contract whereby the asset is owned by the creditor who provides 100% of the purchase price and the renter has full use of the asset. It allows businesses, small and large, to obtain almost any type of equipment without outlaying scarce capital.
An equipment finance lease acts as a true rental arrangement where the asset is treated as an expense, allowing the business owner to finance their equipment off balance sheet for accounting purposes.
The monthly rental payments are 100% tax deductible, provided the goods are solely used for income generating purposes.
Novated Lease
A novated lease can be used by employees who have the option of receiving a car as part of their salary package. Deposits are not required. The full purchase price is required to be financed.
A novated lease is car finance option that allows an employer (via a Deed of Novation) to make lease payments on an employee's behalf. The payments are made from pre-tax income for the term of a lease (or time employed). This reduces taxable income, which in turn, reduces the amount of income tax paid.
A novated lease therefore is a three way agreement between a credit provider, an employer and their employee who is the beneficial owner of the vehicle.
The employee benefits by paying all vehicle operating costs from pre-tax earnings. They can select the vehicle they want and retain ownership if they change their employment.
Commercial Hire Purchase
A Commercial Hire Purchase allows a credit provider to purchase an asset for a business and then hire the asset to the business for a set period between 1 to 5 years.
A hire purchase agreement is treated as a "taxable supply" on the commencement of the arrangement between the hirer and the credit provider. From a taxation position the business is treated as having acquired the asset from the credit provider via a loan at the commencement of the agreement.
The asset being purchased is the security for the finance. The creditor is the owner of the goods and the borrower is the "hirer". When the final payment is made, ownership of the asset passes to the business.
Chattel Mortgage
A chattel mortgage provides finance to purchase goods. The product has a fixed interest rate, fixed term and a set repayment amount for the life of the contract. It may be a favourable finance method for those businesses that wish to retain the equipment at the end of the term and account for Goods and Services Tax (GST) on a cash basis.
The borrower is the owner of the goods with ownership being transferred upon delivery. The credit provider secures the loan and repayment obligation by registering a mortgage over the goods.
100% finance may be available and fees, government charges, insurance, registration and on-road costs can be included into the loan amount for approved borrowers. A cash contribution to reduce the amount financed is allowed and may be a requirement for finance approval.
The balloon or the residual payment of between 10% - 40% of the cost price can be arranged for approved borrowers. This enables businesses to pay a lower monthly instalment during the term of the agreement. The balloon payment can be the last payment to settle the debt or the first month's payment.
Operating Lease
An Operating Lease, is sometimes called an Equipment Rental and is a versatile option for financing high depreciation, short life span new technologies such as computers, telephone systems and all other office equipment which generally have a short lifespan due to high obsolescence.
A business can avoid the risks associated with ownership and have no residual value liability. At the end of the operating lease agreement the business can simply return the equipment.
The product is only available for businesses. The benefits of an operating lease are that working capital is maintained and lease rentals will be fully tax deductible if the equipment is used to generate taxable income and there is no resale value risk as the credit provider will own the equipment at the end of the term of the operating lease.
