Instant Asset Write-Off (IAWO) has been the catch-cry of the motor vehicle and lending sector since April 2020. A call-out to business vehicle buyers of the tax benefits on offer through this accelerated asset depreciation measure which was introduced as a stimulus measure by the Federal Government. IAWO in its initial format offered many businesses extremely attractive deductions on the purchase of eligible assets including motor vehicles. In its expanded and extended format, temporary full expensing, which was introduced in the Federal Budget in October 2020, even more businesses and more assets were included.
However, a key ‘catch’ of the catch-cry is that the asset needs to be acquired using a form of financing that allows for accelerated asset depreciation. The most suitable is seen as sole trader car financing. But despite the loud and widespread calls to action and the benefits available, for many businesses, this form of finance just doesn’t suit their business set-up. This can be due to several reasons including the accounting method used and not wanting to carry the value of the asset/vehicle on their balance sheet. For those looking for alternatives to IAWO/Chattel Mortgage Jade Car Loans offers tax effective options with Business Motor Vehicle Leasing.
With all the promotion of IAWO, you could be led to believe this was the only tax deductible game in town. Well, you would be wrong. There is another finance facility that also offers a tax-effective solution for business vehicle buyers – Motor Vehicle Leasing.
Motor Vehicle Leasing Overview
Leasing has been an extremely popular form of business finance for motor vehicles for a long time and can be extremely tax effective for many businesses. All types of businesses can utilise leasing including SMEs, ABN holders, family enterprises, medium companies and large fleet operators.
It is often referred to as an ‘off-balance sheet’ form of finance as the ownership of the vehicle is retained by the lender. The vehicle is entered on the lender’s balance sheet and as such is ‘off’ the books of the borrowing business. This can be a benefit to some businesses as it is seen to ‘improve the appearance’ of the balance sheet.
We provide motor vehicle leasing with fixed interest rates, fixed terms and fixed monthly lease payments. A residual is optional. This component can be varied, within allowable limits, to structure cost-effective finance for high-end priced motor vehicles.
No deposit leasing is available through Jade Car Loans so the full purchase price can be included in the finance deal. Leasing is available across all categories of vehicles used in a business including passenger cars, utes, cab chassis, SUVs, light commercial vans, wagons and others.
We can achieve effective motor vehicle leasing for low docs, no docs and bad credit applicants.
If purchasing a vehicle for an employee where the employee is prepared to contribute a portion of their salary to the costs, speak with us about Novated Leasing with Salary Sacrificing.
Leasing-Chattel Mortgage Comparison
Deciding as to whether Leasing or Chattel Mortgage is better suited to a business should involve discussions with your accountant. The assessment should based on the objectives of the individual business.
As a rough guide, we offer this comparison of the key features and benefits of Leasing and Chattel Mortgage:
- Vehicle ownership: With Chattel Mortgage the ownership of the vehicle is immediately transferred to the borrower and entered on the business balance sheet. As mentioned above, with Leasing the lender retains ownership so the asset is not listed on the borrower’s balance sheet. This may be of particular benefit to new and smaller businesses.
- Depreciable asset: To take advantage of accelerated asset depreciation measures, the asset/vehicle must appear on the balance sheet of the business claiming the depreciation. This is the case for borrowers with Chattel Mortgage but not with Leasing.
- GST treatment: Chattel allows the full amount of GST on the vehicle to be claimed on the next corresponding BAS for businesses registered for GST. With Leasing, GST is applied to the monthly lease payments (excluding the interest portion) and claimed as, and when, appropriate.
- Tax deductions: With Chattel Mortgage the major tax deduction on the cost of the vehicle and the finance is through depreciation. The interest on the finance can be deducted as an expense. With Leasing, the monthly leasing payment is considered a business expense and is fully tax deductible. Depending on the leasing payment amount, this can be a considerable annual deduction.
- Pre-approved finance: We offer this service on all finance facilities.
- Accounting methods: Chattel Mortgage is best suited to businesses that use the cash accounting method and Leasing for those that implement the accruals method of accounting.
- Interest rates: Chattel Mortgage does attract a lower interest rate than Leasing. But with our better interest rates across the board, we can achieve highly competitive motor vehicle leasing deals.
Refer to our business car loan calculator to compare repayments on both types of finance, while taking into account the other features and benefits of these two most popular vehicle financing facilities for your business.
Securing a Cheap Interest Rate Vehicle Leasing Deal
If Leasing is of interest to you, speak with one of our consultants for a quote on a cost-effective and tax-effective deal for your business vehicle purchase. We can source cheaper commercial car finance rates and structure individual Leasing deals to suit specific business requirements.
Leasing may not be seen as suitable for the major tax deductions associated with accelerated asset depreciation measures but it still offers significant tax deductible elements.
Contact Jade Car Loans at 1300 000 003 for a tax-effective vehicle leasing quote.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.