The Finance Lease is an arrangement where the finance provider (the lessor) purchases the equipment or vehicle required by the customer (the lessee) and is therefore, the owner of the good/s.
The financier leases the goods to the customer under a Lease Agreement, which sets out the residual value of the goods, the term of the lease in months, the monthly rental and the depreciation rate. Leases are utilised by customers who want to update the chattel at the end of the term.
Leasing is classified as a "taxable supply" under the GST legislation. The Finance Lease is therefore subject to the GST. GST is payable on the rentals over the life of the lease and also the sale of the goods (residual) at the end.
| Features |
Benefits |
| Customers can obtain equipment without capital outlay. One hundred percent finance is provided with no deposit or trade permissible |
There is no drain on the customer's cash resources. Customers may use their working capital for other purposes and do not have it reduced by purchasing the equipment outright |
| The finance provider's recognise that lessee's needs vary widely. Repayment schedules are flexible and can be structured to suit customer�s cash flow |
Customers can match repayments to suit their seasonal cash flow. Customers can pay their lease rentals when they have the income available, rather than meet regular monthly installments |
| Customers have the option of paying monthly, quarterly, half-yearly, yearly or irregularly. This is set up at quote/application stage and clearly documented in the contract |
This allows for accurate capital budgeting as the customer is aware of the rental expenses they will incur during the entire term of the lease |
| The terms of the lease are flexible and can be negotiated (subject to financier approval and ATO guidelines) |
Customers can negotiate higher or lower rentals and residual values within an approved range, which can provide them greater flexibility in budgeting
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| The residual value of the leased goods is established in accordance with a schedule issued by the Commissioner of Taxation |
Customers have the 'protection' of the ATO guidelines. The residual value should be the estimated value of the goods at the end of the lease, which helps to avoid shortfalls when the goods are traded |
| Lease rentals are usually tax deductible if the goods are used to produce assessable income. Customers may be able to claim the full rental as a tax deduction provided the goods are used for 100% business purposes |
The tax advantages of leasing are quite attractive. Customers are advised to speak to their accountant or tax adviser before entering a lease agreement |
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Finance 
