Operating Lease
Operating Lease or Rental
An Operating Lease is a commercial finance product which enables the customer to have the use of asset and the benefits of ownership, while the financier retains actual ownership of the asset.
The financier purchases the asset on behalf of the customer, who then rents the asset back from the financier and pays a fixed monthly lease rental for the term of the lease.
At the end of the lease the customer can either: a) make an offer for the goods (which the financier can either accept or reject). or b) return the goods to the financier. Or c) Continue to pay rentals and retain the goods use.
Flexible contract terms ranging from 24 to 60 months (two to five years)
- Fixed interest rate
- Fixed monthly lease rentals
- Costs are known in advance
- An operating lease does not have residual value.
- Tax deductions are available when the financed asset is used for business purposes
- As the GST contained in the car’s purchase price is claimed back by the financier, only the asset’s price exclusive of GST is financed, lowering monthly payments
- Ability to make advance lease payments for tax deduction or cash-flow purposes
- The lease is secured against the asset, allowing lower interest rates
Asset leasing is suitable for companies, partnerships, sole traders and individuals where the leased asset is used for income producing purposes. It is also ideal for employees who want to salary package a vehicle through a novated lease as part of their remuneration.
GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the customer is registered for GST, they can claim some or all of the GST contained in the lease rental and the residual value as an input credit on their next Business Activity Statement.
In the case of vehicles where the amount financed is below the depreciation limit* the customer claims the lease rental as a tax deduction. Above the depreciation limit*, interest charges on the lease and depreciation up to the value of the depreciation limit* can be claimed.
* Depreciation Limit - The maximum asset value that is allowed by the Australian Tax Office when depreciating a motor vehicle. For the 2009-2010 financial year, this value stands at $57,180.00
Note: The above information is provided as a product description only and it is not intended in anyway to be used as taxation, financial, investment or legal advice. Iden Group, its associated companies and employees, recommend at all times that customers seek qualified and independent legal, financial and investment advice. Iden Group and its associated companies and employees do not take any responsibility in respect to the accuracy of the content of the above information.