Hire Purchase can be used to finance up to 100% of the equipment value (excluding GST).
The customer (the Hirer) can utilise an advantage of an up-front deposit or trade-in, which will minimize the financed amount from Komatsu Corporate Finance (the Owner) and thereby reduce the Hirer's repayment commitment.
Komatsu Corporate Finance is the legal owner of the equipment until the payments have been completed under a Hire Purchase contract. In contrast to a Finance Lease, the Hirer has an option to purchase the equipment. Hire purchase contracts can be structured with or without residual values (commonly called Balloon Payments for Hire Purchase contracts).
Frequently asked questions about Commercial Hire Purchase
Q: Is it on or off the Hirer's balance sheet?
A: On the balance sheet
Q: What portion of the instalments are expensed for Australian Accounting Standard purposes?
A: The interest component of each rental is expensed.
Q: What proportion of the instalment is tax deductible?
A: The interest component of each instalment will generally be tax deductible. However, the
Hirer can also claim depreciation deductions on the equipment.
Q: Are up front deposits allowable?
Q: Must there be a residual value (balloon)?
A: No. A residual/balloon is not compulsory.
Q: When is Goods & Services Tax payable?
A: There are two levels of GST payable by the Hirer to the Owner:
1) On commencement of the contract, subject to the interest rate and terms charges being disclosed in the agreement, the Hirer must pay 10% of the equipment's GST exclusive price and terms charges. If the interest rate and terms charges are not disclosed, the Hirer must pay 10% of the sum of all instalments and the balloon; and
2) For new contracts entered into after 31st December 2001 the Hirer must also pay GST equivalent to 10% of the stamp duty applicable to the hire purchase instalments.
The accounting and taxation treatment of financial products is subject to change. We strongly recommend that you seek independent advice from your taxation and accounting adviser.