Vehicle Finance

Thinking of a new car? When you’re buying a car it is easy to get caught up in the moment and just go with the finance option put in front of you. But.. did you know we have access to over 20 lenders which range from major banks to broker only lenders? With this many lenders comes so many solutions and competitive deals. Speak to us first before you go to the car yard or even car sales. We can definitely put you in a position to drive a hard bargain!

Vehicle Finance for Business Owners and Personal Use

What happens if I default on a secured consumer car loan?

In the event of default, the lender’s registered interest gives them the right to: repossess the asset and/or have the first claim on the proceeds of sale. Once you have paid off the loan the registered interest is removed and this is what is known as clear title.

If I buy in a business name what tax implications does this have?

There are four tax implications when you purchase in a business name:

  • GST
  • Depreciation tax expense
  • Interest tax expense
  • Whole repayment expense

The distinguishing feature for what tax implications apply is who holds ownership and any intention to transfer ownership later.

For a chattel mortgage your business holds ownership from day one but with a registered interest by the lender. Generally, this means you can tax deduct interest and depreciation plus claim the GST on the purchase price as an input tax credit off your next BAS.

On the other hand for a commercial hire purchase the lender holds ownership from day one which means the repayment is defined by the ATO as a service subject to GST. If your agreement is entered into from 1 July 2012 the whole repayment, including the principal component is subject to GST.

In other words, for a chattel mortgage and commercial hire purchase of the same amount, the commercial hire purchase would have higher repayments. Having said this, with commercial hire purchases, because of the intention to own the vehicle at the end of the term, GST on the repayment can be progressively expensed over the term in addition to the interest and depreciation.

With a finance lease, the ownership of the vehicle is intended to be held by the lessor with no guarantee of a purchase option at the end. For an operating lease it is the same except the lessor covers all maintenance during the term and definitely takes back the vehicle at the end. Only for an operating lease can the whole repayment can be expensed but not depreciation.

Furthermore for a finance lease the GST on the repayment and residual value can be claimed as an input tax credit, GST on the purchase price is not applicable as there is no potential ownership until the end of the lease term.

Given the numerous tax implications with each of these facilities and the different ways they may apply, we’ve summarised them in a matrix below. We always recommend an introduction to your accountant so we can work together to shortlist options backed with professional tax advice.

 

  CM CHP FL OL
GST Y Y N N
Depr Y Y Y N
Int Y Y Y N
Whole N N Y 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
  • Semi low documentation
  • Low documentation

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 Vehicle Finance or Asset Finance? These are experts to get in touch with.

Luke Xie
Finance Broker
Tommy Lim
Managing Director