Healthy money flow is vital to any business. Right alongside purchase of key assets to retain productiveness and business edge. Traditionally commercial hire purchase finance has offered commercial borrowers the very best of both worlds. Swift use of crucial business cars and hardware minus serious upfront capital outlay. As of 1 July 2012 though, all this has changed.
Corporations, partnerships, sole traders, even vehicle allowance-eligible staff. Every business borrower incurs additional GST liabilities under the revised commercial hire purchase tax treatment. While such GST expenses can later be claimed back in the most part, the effect on commercial money flow is great. So it's essential that all businesses wanting commercial business financing get up to scratch with these commercial hire purchase changes. Whilst doing so , however , it's critical to notice that all is not lost. Amidst such sweeping change to commercial hire purchase finance, one thing stays unchanging - chattel mortgages. This unchanged commercial finance tool shines a beacon of cost benefits and efficiency for embattled business borrowers.
Commercial hire purchase: what has changed?
Historically commercial hire purchase agreements needed payment of GST only on:
- Purchase price of the asset; or
- Upfront cost of the asset
From 1 July 2012, GST is also charged on:
- All interest; and
- Any costs
Borrowers must settle these GST charges on settlement. Either by upfront payment or addition to the CHP loan. Now definitely GST registered borrowers can progressively claim these expenditure back over the loan lifetime. Input Tax Subsidy supplies the transport for such claims. Yet meanwhile, borrowers experience a cash flow shortfall and reduced cost potency. Actually reason enough to consider alternative finance solutions that preserve cash flow and lower liabilities.
One such finance solution is the Chattel Mortgage. Here a borrower takes speedy possession of the funded asset upon purchase. Meanwhile, the lender holds the chattel as security. Now from a GST viewpoint, chattel mortgages offer borrowers similar conditions to conventional commercial hire purchase. Before modified tax treatment bumped up money outlay. Under a chattel mortgage, GST is due on the asset purchase price only. That implies fees, interest, mortgage payments and remaining price are all GST free. Plus borrowers can claim back their GST outgoings on lodgement of their next BAS statements. Simple.
CHP vs chattel mortgage: enlist expert help in making your choice
Tax can be overwhelming enough. Yet when new tax rules apply to a formerly favoured commercial lending tool, it is sufficient to send any borrower into a spin. Be certain new commercial hire purchase tax treatment does not get the best of you. Get expert support in understanding the revised GST implications and alternatives like chattel mortgages. Vet finance broker Natloans places experts on hand to steer you through all this and more. So you can still procure essential assets without being drained of vital business cash flow.
Corporations, partnerships, sole traders, even vehicle allowance-eligible staff. Every business borrower incurs additional GST liabilities under the revised commercial hire purchase tax treatment. While such GST expenses can later be claimed back in the most part, the effect on commercial money flow is great. So it's essential that all businesses wanting commercial business financing get up to scratch with these commercial hire purchase changes. Whilst doing so , however , it's critical to notice that all is not lost. Amidst such sweeping change to commercial hire purchase finance, one thing stays unchanging - chattel mortgages. This unchanged commercial finance tool shines a beacon of cost benefits and efficiency for embattled business borrowers.
Commercial hire purchase: what has changed?
Historically commercial hire purchase agreements needed payment of GST only on:
- Purchase price of the asset; or
- Upfront cost of the asset
From 1 July 2012, GST is also charged on:
- All interest; and
- Any costs
Borrowers must settle these GST charges on settlement. Either by upfront payment or addition to the CHP loan. Now definitely GST registered borrowers can progressively claim these expenditure back over the loan lifetime. Input Tax Subsidy supplies the transport for such claims. Yet meanwhile, borrowers experience a cash flow shortfall and reduced cost potency. Actually reason enough to consider alternative finance solutions that preserve cash flow and lower liabilities.
One such finance solution is the Chattel Mortgage. Here a borrower takes speedy possession of the funded asset upon purchase. Meanwhile, the lender holds the chattel as security. Now from a GST viewpoint, chattel mortgages offer borrowers similar conditions to conventional commercial hire purchase. Before modified tax treatment bumped up money outlay. Under a chattel mortgage, GST is due on the asset purchase price only. That implies fees, interest, mortgage payments and remaining price are all GST free. Plus borrowers can claim back their GST outgoings on lodgement of their next BAS statements. Simple.
CHP vs chattel mortgage: enlist expert help in making your choice
Tax can be overwhelming enough. Yet when new tax rules apply to a formerly favoured commercial lending tool, it is sufficient to send any borrower into a spin. Be certain new commercial hire purchase tax treatment does not get the best of you. Get expert support in understanding the revised GST implications and alternatives like chattel mortgages. Vet finance broker Natloans places experts on hand to steer you through all this and more. So you can still procure essential assets without being drained of vital business cash flow.
About the Author:
Mary Nebotakis - has a B.Economics Dip.Financial Services Cert IV Workplace Learning Assessment. On her website she has got many interesting videos and articles on commercial hire purchases. You will also find more information on chattel mortgages.
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