Business Vehicle Finance

Vehicle Financing

How can I finance my business vehicle
Unfortunately some financiers throw words like lease around without explaining the difference between what your signing, and what a lease actually is.

Furthermore, the tax and GST consequences of your finance arrangement can be very different.

MAIN TYPES OF FINANCE FOR VEHICLES

• Hire Purchase
• Commercial Hire Purchase
• Operating Lease
• Financial Lease
• Chattel Mortgage
• Commercial Loan

TABLE OF MAIN DIFFERENCES

The table below illustrates the main differences between each finance type, in terms of tax deductibility, depreciation on the vehicle and GST. For GST purposes, there are differences on what you can claim based on your registration details – either accounting for GST on a cash basis, or non-cash accruals basis.

	Can I claim all GST on the purchase of my vehicle?	Can I claim GST on the vehicle payments?	Do I get an income tax deduction for my vehicle payments?	Can I claim depreciation on my vehicle?	Will my vehicle show as an asset in my balance sheet?	Is this type of finance complex for tax?
Hire Purchase  *Contract before 01/07/12	Yes – only if you are registered for GST on an accruals basis	No – if you are on accruals, yes if you are on cash – but only 1/11th of principle in each repayment	Yes – but only for the interest on each repayment, to the extent it relates to your business	Yes – to the extent it relates to your business	Yes	Very complex
Hire Purchase *Contract on or after 01/07/12	Yes	No	Yes – but only for the interest on each repayment, to the extent it relates to your bsuiness	Yes – to the extent it relates to your business	Yes (if over $5000 cost, otherwise fully expensed)	complex
Operating Lease	No	Yes	Yes – excluding the GST already claimed	No	No	Simple
Financial Lease	Yes – only if you are registered for GST on an accruals basis	No – if you are on accruals, yes if you are on cash – but only 1/11th of principle in each repayment	Yes – but only for the interest on each repayment	Yes	Yes	Complex
Chattel Mortgage	Yes – cash or accrual GST registration	No	Yes – but only for the interest on each repayment	Yes	Yes	Average
Commercial Loan	Yes – cash or accrual GST registration	No	Yes – but only for the interest on each repayment	Yes	Yes	Average

Startusup highly recommends the use of an operating lease for vehicles that are predominantly for business. This means you are basically renting the vehicle. The reason we recommend this option is because for a true business vehicle, its usually done substantial kilometres, had significant cosmetic damage, and the owner is keen to upgrade after a few years. With this finance option, you simply hand the vehicle back to the financier, and then rent a new one, or you usually have the option to buy that vehicle if you want at a predetermined value. With all the other finance options, you must purchase the vehicle at the end of the term you choose, and usually that book value you pay is higher than actual market value. Commonly you then decide to upgrade vehicles anyway and loose more money on a trade in or private sale.

For further information on finance methods or a referral to a recommended financier, please email [email protected] or arrange an appointment.

This fact sheet is provided as general advice and does not cover every possible situation and related consequence. Further investigation should be done in relation to your own particular circumstances with an appropriate professional, and hence Startusup accepts no liability for actions carried out that rely on the information provided in this fact sheet.