Rogerson Kenny Business Accountants Melbourne

Financing Property, Plant & Equipment

Financing Cars & Equipment

When starting a business you may need to finance a car, light commercial vehicle, truck or piece of equipment or machinery. You might even need to fit out a shop or office. The obvious advantage of financing the item is that you don't have to pay for the item upfront from your savings or capital. By financing the item you only need to fund the monthly repayments which can help preserve your capital.

There are a number of different ways to finance vehicles and equipment for your business including leasing and chattel mortgage. Each of these finance options potentially have different taxation, GST and FBT implications. They can also have a varying impact on your profit and cashflow.

As your accountants we are committed to saving you money and giving you the most tax effective advice including claiming back any upfront GST with your next BAS. When you decide to finance a motor vehicle, truck or piece of equipment for your business or farm simply call us on (03) 9802 2533 as we have access to a vehicle and equipment service that provides up to 6 quotes from a panel of major lenders who provide wholesale rates of finance. It is a relatively simple application process because we already know your financial position. The chart below provides a brief summary of the various finance options.

Question	Hire Purchase	Chattel Mortgage	Lease	Novated Lease
Trade in or cash deposit can be used to reduce the amount financed	Yes	Yes	No	No
How is GST applied to the finance	GST Inclusive price financed. No GST on repayments	GST Inclusive price financed. No GST on repayments.	GST Exclusive price financed. GST applicable on rentals.	GST Exclusive price financed. GST applicable on rentals.
Can client claim full GST on next BAS	If client is on cash for GST, claimed over terms of contract. If on accruals for GST, can be claimed on next BAS.	Yes	GST on monthly rental is claimable.	GST claimable by employer during term of the novation.
Documentation Fee	Yes	Yes	Yes	Yes
Registration Fee	No	ASIC Registration fee payable if a company. Does not apply to individuals.	No	No
Balloon/Residual value at the end of the term	Usually to maximum value allowable under ATO Guidelines for Lease	Usually to maximum value allowable under ATO Guidelines for Lease	Based on ATO Guidelines. GST payable on residual.	Based on ATO Guidelines. GST payable on residual.
Fix Interest Rate	Yes	Yes	Yes	Yes
Fixed Payments/Rentals	Yes	Yes	Yes	Yes
Client Tax Deduction for Depreciation & Interest	Yes	Yes	No	No
Client Tax Deductions for Rentals	No	No	Yes (Fixed Deduction each month)	Yes (Employer claims)

Disclaimer: The above table is produced for information purposes only. We do not provide, and the above table does not constitute, financial, accounting or taxation advice. We recommend that you and/or your client review the relevant documentation and form your own opinion or seek independent advice.

Fleet Discounts
Through our association with a major discount car buying service we can save you hundreds (if not thousands) of dollars when buying a new car or light commercial vehicle. Discounts are available from over 20 different manufacturers and all you need to do is provide the precise specifications of the car you intend buying (including any non-standard extras) and we can get you an on-road price for the car.

Claiming Motor Vehicle Expenses

With Motor Vehicle Expenses we urge you to contact us for professional advice tailored to your individual circumstances. This summary is provided only as a guide because there are a number of other issues to consider including:

• The guidelines do not apply to vehicles other than cars - for example, utility trucks or panel vans with a carrying capacity of 9 or more passengers or motorcycles.
• If you operate your business through a Company or Trust structure you might be able to claim all your motor vehicle costs but private usage might be subject to Fringe Benefits Tax (FBT).

If you use your car for income producing purposes, you could be entitled to claim a tax deduction for motor vehicle expenses. Examples of tax deductible motor vehicle usage include the following:

• You carry work tools or equipment that could not be left at the workplace
• If your home is your employment base, travel to a secondary workplace
• You have various places of employment and you regularly work at more than one site each day before returning home
• You use your car to travel directly between two separate places of employment (e.g., you have a second job)
• You travel from your normal workplace to an alternative workplace, such as a clients' premises

Once you have established your entitlement to claim your motor vehicle expenses, you can then select one of the four methods below and apple the one that provides the highest possible tax deduction.

Method 1 - Cents Per Kilometre - Your claim is based on a set rate for each business kilometre depending on your vehicle's engine capacity. Based on a reasonable estimate of travel you can only claim a maximum of 5,000 business kilometres and you do not need any written evidence to substantiate your claim.

Method 2 - 12% of Original Value - Your claim is calculated at 12% of the original value of your car (subject to Luxury Car Price Limits). Your car must have travelled (or would have travelled) more than 5,000 business kilometres in the income year and you do not need any written evidence to substantiate your claim.

Method 3 - One Third of Actual Expenses - Your claim is based on one third of your car's actual expenses. Your car must have (or would have) travelled more than 5,000 business kilometres in the income year and you need written evidence or odometer readings for fuel and oil costs. For all other car expenses you need written evidence.

Method 4 - Logbook - Your claim is based on the actual business use of your motor vehicle. You need to keep a vehicle logbook for 12 continuous weeks that documents your odometer readings for the start and end of each business trip. You can claim fuel and oil costs based on odometer records but you will need written evidence for all other car expenses.

Financing

A wide range of financing options exist, each with their pros and cons. At Rogerson Kenny we know the financial market and have the experience to assist you in securing the best financing option for your personal and business goals. Our experience in the market means we can also structure debt upon acquisition to maximise tax advantages.

Let our experienced team explore the best financing options with you to get your business closer to its goals!

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