Commercial Hire Purchase
Purpose: A Commercial Hire Purchase
agreement is an agreement to purchase a piece of equipment/vehicle
subject to payment terms to the financier. You will automatically own
the goods when you pay the final payment, unlike to a lease.
Term: The term of finance agreement can be from 1 - 5 years.
Deposits are not required. You might choose to trade in an existing
vehicle in order to put in a deposit to reduce the amount to be
Residual/Balloon: You can
choose to have a balloon payment as the last payment of your finance
agreement. This balloon payment is usually between 10% - 40% of the
cost price, but may be as low as one dollar, dependent upon the
The financier retains legal title (ie: owns the goods) during the term
of the agreement. You automatically secure ownership upon payment of
the final instalment.
For income tax and GST purposes, a hire purchase agreement is treated
very differently to a finance or operating lease. Under GST, a hire
purchase agreement is treated as a "taxable supply" on the commencement
of the arrangement between the hirer and the financier.
a hire purchase arrangement, there is deemed to be a sale of the
equipment from the financier to the hirer, the GST liability arises at
the commencement of the arrangement. Even though the total amount
payable under the agreement will be paid by periodic installments and
ownership of the equipment will not pass to the hirer until the final
repayment. The financier, being the supplier of funds, is responsible
for the payment of the GST liability.
the amount financed is inclusive of GST, and your monthly repayments
are not subject to GST unless you are on a cash basis for GST. (Seek
independent advice from your accountant if necessary). You can claim
the interest component of all repayments. The depreciation of the goods
is fully tax deductible providing goods are used 100% for business
purposes. The Car loan market is very competitive. If you have any questions
that we can help you with, please call at any time on 1300 79 63 69 or
click on the Make an Obligation Free Enquiry link below and one of our
experienced consultants will be in touch with you within 24 hours.