Car Leases...Tax-Effective?

There are also differences in how GST can be claimed.

Operating Lease
No matter if you're on Cash or Accrual for GST purposes, you can only claim a portion of the GST with each lease payment.

Chattel Mortgage/Hire Purchase
Cash - A portion of the GST with each payment
Accruals - The entire amount upfront

Finance Lease / Loan
No matter if you're on cash or accruals, it's the whole amount upfront.

As Rob said, see an accountant. The best form of leasing arrangement for your situation will depend on a lot factors and how they inter-operate.
 
Has anyone mentioned that if you pay out a lease at maturity and then trade the car, your purchase date is that of the final payout so any "fat" in the deal is fully taxed? Hire purchase/chattel mortgages start when you take delivery.

A mate of mine (a good accountant) who passed on over 25 years ago didn't agree with them then. As far as I know, nothing has really changed.

That is not to say that such general advice suits all but if you are so far down the totem pole that you need to ask a forum instead of your accountant, go for the cheapest/simplest offer.
 
If you lease a vehicle you can only claim the lease expenses and associated running costs. If your business buys the vehicle with a commercial hire purchase loan you can claim the repayment costs, running expenses PLUS the depreciation on the vehicle.

As depreciation is usually the largest vehicle expense - especially for expensive cars - it can make a big difference.

With a lease you cant claim the depreciation as you (or your business) does not own the vehicle. The leasing company does.

So just get a commercial hire purchase loan for the car in the name of your business. Deduct say 20% (or nothing) for private use on your claim. Simple.
 
TPFKAD said:
Or just buy some old clanger for 3K and put the remainder into something useful instead of swanning about. Noice !!!
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In relation to cars (a depreciating asset) I think this is possibly the best advice ever. Many times I have been swanning about in a $1,000 a month liability thinking that it was preventing me from building my IP base more quickly.......but then the Turbo kicks in and I'm off in a rush of adrenaline:p and my thoughts turn once again to turning more fossil fuels into speed.

However, I digress, if you are set on buying a new car for mostly business purposes, then there are a lot of options as all the posters have put up. You do need specific accounting advice for you own particular circumstance.

Unfortunately JIT, I don't think you'll ever get a car to go cf+ :eek: But I like you're attitude:D
 
evand said:
With a lease you cant claim the depreciation as you (or your business) does not own the vehicle. The leasing company does.
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Yes but the lease company doesn't pass on some of the cost if they can claim depreciation themselves.

Even if they did, 100% of your lease payment is deductible so effectively the same - you negotiate the price.

Leasing can be good where ownership risk remains with the Lessor.

Leasing is also good if you are considering purchasing the asset at some nominal residual value at the end of the lease for yourself or an associate.

But note luxury car leases are treated as a hire purchase for tax.

In some circumstances, leasing is more powerful than ownership.

Cheers,

Rob
 
I have a novated lease.

It's a complicated piece of maths to work out. Things that make it more 'worth it'.

- More expensive running costs (sportier cars, expensive tyres, brakes, suspension, 98 fuel, higher insurance and servicing)
- More KM's each year
- More expensive car

Obviously you're still spending money and it's not a way to wealth (which I'm sure you already knew).

I think it's best to view it as a way to own a more expensive car for the cost of a cheaper car, plus you're freeing up funds to use for other things. My sums showed that my $15k 1993 car I owned outright cost the same as leasing a $30k 1999 model of the same car. Also that $15k I'm not 'driving around in' could now be a deposit for an IP.

On a bog standard Falcon or Conformadore it's probably not worth the hassle.

I agree buying a $3k clanger is the best for your wealth, but as I'm getting older I have more focus on my safety. For $15k you can get a 2 year old Corolla or similar with ABS, airbags and a great crash test rating. Ideally ECS / TCS too.
 
I don't think we have touched on the real kicker....

you write the vehicle off to the min. the ATO allows and as there is no CGT on MVs the difference is tax free.

owning a nice car should cost virtually nothing, especially if you have a Westpac GM credit card and get your $3k discount.
 
Hi there,

Thanks for the replies, it's starting to make more sense.

I'll have to look further into chattel mortgages or commercial hire purchases versus standard leases and do the maths on it and then discuss it with my accountant.

Another question, is it better to go to a dealer direct for the car you are looking for or use a particular finance company or a car finance broker? Anyone in particular?
 
We just went to the local Mazda dealer and did the best deal we could on a Mazda 2 and a Mazda 3 then sorted out the leases finance with our broker. So for about $10k per year we have cars sorted out for the next few years.

Bit of now grattification. On a crappy winter morning you know the car will start, the climate control works great and you have a safe ride to get you around.

Cheers
Graeme
 
DavidMc said:
I think it's best to view it as a way to own a more expensive car for the cost of a cheaper car, plus you're freeing up funds to use for other things. My sums showed that my $15k 1993 car I owned outright cost the same as leasing a $30k 1999 model of the same car. Also that $15k I'm not 'driving around in' could now be a deposit for an IP.
Click to expand...

Yes, that's a good way to look at it.
 
bene313 said:
I'm surprised this wasn't mentioned sooner - buy the car and get your 30% tax offset, plus the usual depreciation to 100% of the value. Effectivley writing off 130% of the vehicle for tax purposes.
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I know it finishes June 30, but when does it start?
 
JIT said:
Ausprop, what's that about, can you elaborate?
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there has been discussion in here about it before and I think it's GeeCee that's a big fan and changes the SV6 every year.

it's a credit card and every dollar spent earns discount off Holdens - max $3k on a commodore. it comes off after all negotiation, fleet disc etc...

so you buy say teh 60th anniv commodore for the $30k on road... beat them down to $27k or whatever, use your GST input tax credit to fund the payments initially, then end of year trade in and there should be minimal change over
 
i know im prob jumping in here without fully understanding all this topics info but is there anyone that could do a break down with number if say they were to lease a 35k hilux (95% business use)? or is it impossible without talking with accountant.

Thanks
 
I disagree with this. The HP payments should be similar to the lease amount plus you get the depreciation deductions as well with HP. Depreciation is at about 9% or 10% pa i think.

So its a double bonus. Plus comm. HP has a balloon at the end if you like. You can structure it many ways to your own circumstances and benefit.

So, its very similar to a lease except you get to claim the depreciation.


Rob G. said:
Yes but the lease company doesn't pass on some of the cost if they can claim depreciation themselves.

Even if they did, 100% of your lease payment is deductible so effectively the same - you negotiate the price.

Leasing can be good where ownership risk remains with the Lessor.

Leasing is also good if you are considering purchasing the asset at some nominal residual value at the end of the lease for yourself or an associate.

But note luxury car leases are treated as a hire purchase for tax.

In some circumstances, leasing is more powerful than ownership.

Cheers,

Rob
Click to expand...
 
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