Commercial Hire Purchase (also known as a CHP or Asset Purchase) is similar to leasing, except the customer claims the allowable depreciation on the vehicle or equipment plus the interest component as a tax deduction. This is as opposed to claiming the actual lease payments.
The choice between the two will depend of which option maximises your tax deduction. this in turn will depend on the term and the depreciation rate allowable on the vehicle or equipment. The customer can structure the payments or residual can be used to offset the vehicle mid term or term end, helping you avoid a potential capital gains tax liability.
Commercial Hire Purchase is generally suitable for business users using the “accruals” method of accounting for GST, or for an individual who uses their Vehicle for business.
Under the “accruals” method, the GST component of the vehicle purchase price may be claimed back from the tax office in the first Business Activity Statement after purchase.
We recommend that you pay the GST refund off the loan balance, reducing the interest charges.
You can structure a loan so you pay in the GST after you have claimed it back from the ATO so you are never out of pocket.
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