CHATTEL MORTGAGE

A Chattel Mortgage is a commercial finance product where the borrower takes ownership of the vehicle (chattel) at the time of purchase.

Under a Chattel Mortgage the financier advances funds to the customer to purchase a vehicle, and the borrower takes ownership of the vehicle (chattel) at the time of purchase.

The financier then takes a "mortgage" over the vehicle as security for the loan, by registering a Fixed and Floating Charge with ASIC. 

Once the contract is completed, the charge is removed giving the customer clear title to the vehicle.

A Chattel Mortgage is suitable for those companies, partnerships and sole traders who use the cash method of accounting (they record business income and expenses as and when they occur) as it allows them to claim the GST in the vehicle's price up-front.

GST is charged in the purchase price of the vehicle but not the monthly rental or the contract balloon (final installment).

Where the borrower is registered for GST, they can claim some or all of the GST contained in the vehicle price as soon as they lodge their next BAS, rather than over the term of the loan.

Under a Chattel Mortgage the borrower can claim the interest charges on the contract and depreciation up to the Depreciation Limit as a tax deduction.

Lawrence Commercial can help tailor the correct facility to meet your specific borrowing needs. Contact Lawrence Commercial and find out how we can take care of your business financing needs.

NOVATED LEASING

Novated Leasing is a method of salary packaging a car, under which an employee leases a car and the employer agrees to take on the employee's obligations under the lease, paying the monthly lease rentals from the employee's pre-tax income.

A Novated Lease is a three way agreement between an employer, employee and finance company whereby the employee enters into a Car Lease (Finance Lease) with the financier and the employer agrees to take on the employee's obligations under the lease.

Under this arrangement, the employer pays the monthly lease rentals on behalf of the employee, and provides the vehicle for the employee to use as part of their salary packaging arrangement.

If employment ceases for any reason, or the lease agreement is finalised, the Novation ceases and the obligations assumed by the employer revert back to the employee.

For Employees:

For Employers:

A Novated Lease will suit any employee who wants to include a motor vehicle as part of their salary package, so long as their employer offers salary packaging as an option for employees.

Under a Novated Lease, the finance company and employer can claim an Input Tax Credit (ICT) for the GST included in the purchase price of the vehicle and the monthly lease payments. The benefit of these Input Tax Credits is passed on the employee, essentially making a Novated Lease GST-free (subject to a few limits).

At the end of the lease - or in the event of early termination - GST is charged on the residual value of the lease, and as the Novation reverts back to the employee, the employee is responsible for paying the GST on the residual.

Fringe Benefits Tax (FBT) is also payable on the benefit provided through the Fully Maintained Novated Lease, and this expense is normally passed on to the employee. The amount of FBT depends on the kilometers travelled each year - the higher the kilometers, the lower the FBT - although this FBT can be offset through employee contributions to the running costs of the vehicle (the Employee Contribution Method (ECM).

Lawrence Commercial can help tailor the correct facility to meet your specific borrowing needs. Contact Lawrence Commercial and find out how we can take care of your business financing needs.

FULLY MAINTAINED NOVATED LEASE

A Fully Maintained Novated Lease is a method of salary packaging a car and its operating costs, under which an employee leases a car and the employer agrees to take on the employee's obligations under the lease, paying the monthly lease rentals and operating expenses from the employee's pre-tax income.

This is distinct from a Non-maintained Novated Lease, where only the lease rentals are deducted from the employee's pre-tax income. 

A Novated Lease is the most common form of salary packaging a car.

A Novated Lease is a three way agreement between an employer, employee and finance company whereby the employee enters into a Car Lease (Finance Lease) with the financier and the employer agrees to take on the employee's obligations under the lease.

In addition to the lease rentals, the car's operating expenses are also deducted from the employee's pre-tax income. Some examples of the types of operating expenses that can be packaged are:

Under this arrangement, the employer pays the monthly lease rentals on behalf of the employee, and provides the vehicle for the employee to use as part of their salary packaging arrangement. When the vehicle requires fuel or maintenance, the employee pays for these with a fuel card.

If employment ceases for any reason, or the lease agreement is finalised, the Novation ceases and the obligations assumed by the employer revert back to the employee.

For Employees:

For Employers:

A Fully Maintained Novated Lease suits any employee who wants to include a motor vehicle and its operating expenses as part of their salary package, so long as their employer offers salary packaging and the employee drives a reasonably high number of kilometres each year.

Under a Fully Maintained Novated Lease, the finance company and employer can claim an Input Tax Credit (ICT) for the GST included in the purchase price of the vehicle, the monthly lease payments, and the operating costs. The benefit of these Input Tax Credits is passed on the employee, essentially making a Fully Maintained Novated Lease GST-free (subject to a few limits).

At the end of the lease or in the event of early termination, GST is charged on the residual value of the lease, and as the Novation reverts back to the employee, the employee is responsible for paying the GST on the residual.

Fringe Benefits Tax (FBT) is also payable on the benefit provided through the Fully Maintained Novated Lease, and this expense is normally passed on to the employee. The amount of FBT depends on the kilometers travelled each year, the higher the kilometers, the lower the FBT, although this FBT can be offset through employee contributions to the running costs of the vehicle (the Employee Contribution Method (ECM)).

Lawrence Commercial can help tailor the correct facility to meet your specific borrowing needs. Contact Lawrence Commercial and find out how we can take care of your business financing needs.

ASSET LEASE

An Asset Lease enables the borrower to have the use of their business equipment and the benefits of ownership, while the financier retains actual ownership of the equipment.

The financier purchases the equipment on behalf of the borrower, who then pays the financier a fixed monthly lease rental for the term of the lease. 

At the end of the lease the borrower can either pay a residual on the lease and take ownership of the equipment, sell the equipment or re-finance the residual and continue the lease.

GST is charged on the monthly lease rental and on the residual value at the end of the lease. Where the borrower 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. The borrower can claim the lease rentals as a tax deduction.

Lawrence Commercial can help tailor the correct facility to meet your specific borrowing needs. Contact Lawrence Commercial and find out how we can take care of your business financing needs.

COMMERCIAL HIRE PURCHASE

A Commercial Hire Purchase is a finance product where the borrower hires their business equipment from the financier for a fixed monthly repayment over a set period of time. 

Under a Commercial Hire Purchase arrangement the financier agrees to purchase the equipment on behalf of the borrower, and then hire it back to them over a set period of time.

The borrower has the use of the business equipment for the term of the contract but does not own it.

At the end of the contract term when the total price of the equipment, minus any residual, and the interest charges have been paid in full, the borrower takes ownership of the equipment.

Where the hirer is registered for GST, they can apply Input Tax Credits to claim back the GST contained in the purchase price of the equipment.

Businsses using Accrual accounting can claim the GST as a lump sum on their next Business Activity Statement (BAS), whereas those using Cash accounting can claim the GST in installments over the term of the contract.

The customer can claim depreciation of their equipment as a tax deduction.

Lawrence Commercial can help tailor the correct facility to meet your specific borrowing needs. Contact Lawrence Commercial and find out how we can take care of your business financing needs.

CHATTEL MORTGAGE

Under a Chattel Mortgage the borrower takes ownership of the equipment (chattel) at the time of purchase.

Under a Chattel Mortgage the financier advances funds to the customer to purchase business equipment, and the borrower takes ownership of the equipment (chattel) at the time of purchase.

The financier then takes a mortgage over the equipment as security for the loan. 

Once the contract is completed, the mortgage is removed giving the borrower clear title to the equipment.

GST is charged in the purchase price of the equipment but not the monthly rental or the contract balloon (final installment).

Where the borrower is registered for GST, they can claim some or all of the GST contained in the equipment's price as soon as they lodge their next BAS, rather than over the term of the loan.

Under a Chattel Mortgage the borrower can claim the depreciation of the equipment as a tax deduction.

Lawrence Commercial can help tailor the correct facility to meet your specific borrowing needs. Contact Lawrence Commercial and find out how we can take care of your business financing needs.

EQUIPMENT RENTAL

Equipment Rental is an agreement between a financier and a borrower whereby the financier buys the equipment on behalf of the borrower and rents it back to them over a fixed period.

When using an Equipment Rental, the financier buys the equipment on behalf of the borrower and rents it to them for fixed payments over a fixed period.

The borrower simply makes fixed monthly rent payments, and at the end of the contract either hands back the equipment to the financier (with no more to pay), continues the rental agreement or buys the equipment outright at market value.

With Equipment Rental the borrower can claim 100% of the rental payments as a tax deduction. This can be more tax effective than other forms of finance where depreciation plus interest costs are claimed.

Lawrence Commercial can help tailor the correct facility to meet your specific borrowing needs. Contact Lawrence Commercial and find out how we can take care of your business financing needs.