Asset & Equipment Finance

An asset is something of use or value. To a business, this could be any income generating item from machinery to electronic devices. If it has a serial number we can broker the finance for it. For a smooth asset finance experience, it is about choosing “the” lender who understands the asset you are purchasing as well as your business. We have the relationships and expertise to guide you through the application process, take care of the paperwork, manage settlement documents and thus deliver the asset within a timely manner.

Finance the Equipment needed to get the job done

What is equipment finance?

A loan, lease, rental or hybrid facility that allows your business to obtain assets to operate more efficiently.

What is an equipment loan?

An equipment loan is a facility where your business purchases the equipment with loan funds from the lender who registers an interest over the equipment as security.

What is an operating lease?

A rental agreement where the equipment is rented to you by the lessor and returned to them at the end of the term. There is no option for ownership at the end of the lease agreement.

What are the tax implications of each type of equipment finance?

The tax implications depend on who holds ownership at the time of purchase and any intentions to take ownership at the end of the term.

For an equipment loan, as your business holds ownership at the start, the tax implications are:

  • Equipment is part of your assets
  • Loan facility is part of your liabilities
  • Deductions can be made for interest and depreciation
  • Input tax credit for GST on the purchase price

Similarly for a commercial hire purchase and Finance Lease there is an intention to own the equipment at the end of term, you can still deduct interest and depreciation as well as claim the GST as an input tax credit.

Note for commercial hire purchase agreements entered into after 1 July 2012 the whole hire purchase repayment, including the principal component is subject to GST.

This means for a chattel mortgage and commercial hire purchase of the same amount, the commercial hire purchase would have higher repayments.

This can be a quick deciding factor between an equipment loan or commercial hire purchase. It is important to check with your Accountant so you can decide based on the overall benefits and costs.

For an Operating Lease Lease there is no ownership or set intention to own the equipment so the whole repayment can be tax deducted but no depreciation. GST is applicable to the whole repayment and it can be claimed as an input tax credit. Similarly for an operating lease there is definitely no intention to own the equipment so the same tax implications apply.

There are so many implications with each of these facilities and different ways they may apply. We’ve summarised them in a matrix below to make the comparison easier. We always recommend an introduction to your accountant so we can work together to provide recommendations backed up by professional tax advice.

 

CM CHP FL OL
GST Y Y Y N
Depr Y Y Y N
Int Y Y Y N
Whole N N N Y
What supporting documents do I need to provide?

All lenders will require:

  • Certified Driver license OR Passport and Medicare card
  • Rates notice for property / properties owned
  • Statement of Assets & Liabilities

Then there are three classes of income verification you can provide:

Full documentation involves:

  • Last 2 Years Company / Trust Tax Returns & Financial Reports
  • Last 2 Years Individual Tax Returns & Notice of Assessments
  • Last 12 months ATO Integrated Client Account and Integrated Tax Account

Semi low documentation:

  • Latest BAS statement
  • Last 12 months ATO Integrated Client Account and Integrated Tax Account

Low documentation:

  • Self or accountant certified income
  • Or affordability statement

Please note this list is client dependent and will be tailored to your unique scenario.

WHO TO TALK TO

Need professional advice on Asset & Equipment Finance or Vehicle Finance? These are experts to get in touch with.

Luke Xie
Finance Broker
Tommy Lim
Managing Director