A Lease Agreement is a series of rental payments over a period of time with an end value (residual) placed on the goods. This residual value is determined by parameters set down by the taxation office.
With a Lease Agreement the Financier (Lessor) agrees to purchase the goods required by you (Lessee) and therefore becomes owner of the goods. The goods are then leased back to you under a Lease agreement, which sets out the residual value of the goods, the term of the Lease in months, the monthly rental (including GST & stamp duty and the depreciation rate).
When the Lease Agreement expires there are several
alternatives available to you:
- Return the goods to the Financier who will then sell it in the market place. If there is a shortfall on the sale of the goods and the outstanding residual value then you will need to make up the shortfall.
- Refinance the residual value over a further term.
- Make an offer to purchase the goods, which may be accepted.
Rentals can be structured on a monthly, quarterly, half yearly, annual or irregular basis depending on your requirements with the term ranging from 1 to 5 years.
The Residual value is established according to parameters set down by the Taxation Department. Lease rentals are tax deductible and the GST payable on the rentals is claimed back in your BAS according to the % of business use. (Always consult your Accountant to discuss the best option to suit your circumstances.)
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