5 tax tips from 5ways – Day 3

4

Jan

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 […]

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