Hire Purchase

The Hire purchase option is usually used for organisations that use the ‘Accruals’ method of accounting, relating to the Goods and Services Tax (GST) or for Individuals that use their asset for business purposes. The GST Component of the asset being purchased can be claimed on the next Business Activity Statement, instead of claiming the GST over the term of the finance contract.

Options:

You can select to finance the full purchase price or use a deposit or a trade in, to reduce the amount financed, which reduces your repayments. You could even apply your GST refund to pay off your loan earlier and to save interest paid over the term of the loan.

Tax Claims:

With a Hire Purchase loan you are not the owner of the asset until the total amount owed is paid in full. Even so you may still claim a tax deduction for the depreciation of the asset and also claim the interest component of the loan repayments where the asset is used for business related purposes. Because the repayments are calculated on the GST inclusive price of the asset, hire purchase repayments attract no GST.

(Refer to your tax accountant for all confirmation of current tax claims available).