An Operating Lease is a financial solution when you wish to finance 100% of the equipment value.
Komatsu Corporate Finance is the legal owner or Lessor of the equipment and the customer is the Lessee.
The Lessee has no option to purchase the equipment.
Frequently asked questions about the accounting and taxation treatment of a true Operating Lease
Q: Is it on or off the Lessee's balance sheet?
A: Off the balance sheet.
Q: What portion of the rentals is expensed for Australian Accounting Standard purposes?
A: The full rental (excluding GST) is expensed to the Lessee for accounting purposes.
Q: What proportion of the rental is tax deductible?
A: The full rental (excluding GST) is tax deductible to the Lessee for Income Tax purposes.
Q: Are up front deposits allowable?
A: No, in accordance with Australian Tax Office requirements.
Q: Must there be a residual value?
A: Yes. But this value cannot be guaranteed by the Lessee and it must be of a certain minimum
size to satisfy Australian Accounting Standards. The residual values are generally not
disclosed to the Lessee.
Q: When is Goods & Services Tax payable?
A: GST is paid with each rental.
Q: Are there any other limitations?
A: The lease term cannot exceed 75% of the equipment's useful life. Also, AASB 117 "Leases"
requires substantially all the risks and rewards incidental to ownership of the leased
equipment to remain with the Lessor.
Q: What happens at the end of the lease?
A: The Lessee must return the equipment to the Lessor, unless the lessor has agreed to extend
the lease for a further term. Return conditions will apply.