Are you considering leasing a car for personal or business use? Does your business need new equipment or machinery? Get help from your Count adviser with your next lease to save tax, money, and time...
Business leasing:
Leasing and equipment finance can be an effective
way for you to access what you need now, without paying
everything upfront. For business purposes, the main benefits
are that you free up working capital, gain access to new
vehicles or equipment, and possibly claim a tax deduction
in your next BAS.
Tax benefits:
These will depend on your personal situation. Your Count
adviser can help you choose a suitable leasing structure
which is tax effective and can explain various tax rules
and exceptions.
| What
you need to know about business leasing and equipment
finance: Almost anything can be leased or purchased as long as the asset will be used more than 50% of the time to earn assessable income. This includes vehicles, computers, machinery and other types of equipment. Leasing can be a convenient way to minimise equipment expenses paid by the partners of a joint venture. Applicants for a lease can be Companies, Individuals, Trusts, Partnerships, or Sole Independent Traders. You must have home equity and produce tax returns for the last two years for your business to be eligible. |
Thinking about leasing a vehicle from a car dealership? Think again...
Traps to avoid – dealing with car financiers
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Going through your car dealer for finance might seem convenient at the time, but you could end up with an expensive loan and/or more restrictive terms and conditions. The ‘Rule of 78’ is one common instance of hidden costs (see below). Extra costs could include establishment fees, annual fees, early exit fees and late payment fees. Watch out for these penalties being obscured or played down. |
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Car dealers may try to avoid giving you a guaranteed interest or repayment rate until you have entered into a contract. This is because once you have the quote you can potentially go to bargain with another car dealer. Ultimately, this can lead to long negotiations, or entering into a contract when there are better options. With your adviser, you have access to a wide range of competitive quotes straight away. |
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A car dealer’s aim is usually to close the deal. But this could mean being rushed into a decision without considering other options. If you are not confident about repayments or how the deal will affect your tax and financial situation, being rushed into an agreement can have damaging effects on your personal or business capital. |
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Always make sure you feel comfortable with your finance options. For example, avoid dealing with two sales people at once in a car yard, as this can put pressure on you to accept an agreement. |
| Lease
contract warning: ‘Rule of 78’ As part of the deal, car financiers often arrange for the consumer to pay a large amount of the future interest should the lease be paid out early. At the start of the contract, the interest rate appears quite favourable, but in the long term, the consumer pays much more. The practice has been in existence for over 100 years, although it was banned in the United States in 1998 and declared an unacceptable accounting method for leasing. It is still in operation within Australia – however Count advisers do not recommend such leasing contracts. Make sure you understand the full consequences of
any offer as the penalties can hurt! |
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Thinking
of leasing a luxury car? *For the 2006-2007 financial year. The limit is reviewed each financial year and may change. |
| Stamp duty abolished on
leases As of 1 January 2007, Queensland, Victoria and Western Australia no longer have Stamp Duty on lease and hire purchases, and the same will apply to the ACT, NT, and NSW from 1 July 2007. |
Next: Choosing a loan: Get by with a little help from your adviser |
As at 17 May, 2007 |
