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A Commercial Hire Purchase (CHP) is generally suitable for organisations using the 'accruals' method of accounting for
the Goods and Services Tax (GST) or for individuals who use their motor vehicle for business related purposes. Under the
'accruals' method, the GST component of the acquisition price of the motor vehicle (or other asset) can be claimed back
on the entity's next Business Activity Statement, rather than claiming the GST over the term of the finance contract.
Flexibility of Commercial Hire Purchase
Flexibility is an attractive feature of a Commercial Hire Purchase. You can either finance the total purchase price, or use a
deposit or trade-in to reduce the loan repayments. You can even use the GST refund to contribute towards paying off the loan,
thereby reducing the amount financed and the interest paid over the term of the loan.
Tax Benefits of Commercial Hire Purchase
Unlike a chattel mortgage, under a Commercial Hire Purchase arrangement you do not become owner of the motor vehicle until all
monies owed under the arrangement are paid. However, you can still claim a tax deduction for the depreciation on the motor
vehicle as well as the interest component of the loan repayments where the motor vehicle is used for business related purposes.
In addition, GST is not payable on the Commerical Hire Purchase repayments.
Other Benefits
Other benefits of a Commercial Hire Purchase include:
- The repayments are fixed over the term of the Commercial Hire Purchase.
- The term of the loan ranges from 9 months to 60 months.
- You can structure the repayments with or without a balloon payment at the end
of the term of the Hire Purchase to tailor your repayments to suit your cash flow.
Downloadable PDF Information Pack - Commercial Hire Purchase (CHP)
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Disclaimer: We recommend that prior to entering into any financial arrangement that you seek independent financial advice.
The information contained herein is of a general nature only and does not take into account your personal circumstances.
Southgate Financial Services Pty Ltd, its agents, employees and lenders accept no responsibility for any loss that may arise.
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