Wednesday always makes me think of the tax treatment of cars. As a tax geek that’s how I roll.
“I’m looking at buying a car, should I lease, hire purchase or Chattel mortgage?”
Great question this, often comes up. A lot of time is spent analysing the benefits. I think that at the end of the day it’s a personal preference. Chattel mortgage and Hire purchase (for tax) have similar treatments. Some agreements that say “lease” on the front page are actually hire purchase when you read the detail. Get your accountant to check it out, or better still call your accountant before you get the finance.
Here is a brief matrix of the two:
|
Ownership |
Tax deductibility |
GST |
complexity of accounting |
|
| Lease |
Not you |
the full lease payment |
1/11th of the lease payments |
simple |
| Hire Purchase or Chattel Mortgage |
You |
Interest component of the repayments + depreciation |
Business use of the GST on the purchase price |
not simple |
Currently getting the finance is the struggle. Whatever way you can finance an asset will be better than paying cash.
And my answer to the Lease/HP question – simple is good, so Lease is good.
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Paul Meissner – Director