The financier purchases the asset required by the customer and then leases it to the customer. The customer pays a rental to the financier to use the asset. At the end of the agreed rental period the customer can return the asset which will be sold at auction or the financier may offer to sell the asset to the customer.

• The customer does not have any right to purchase the asset (otherwise it is not classified as a genuine lease from a taxation perspective).
• The customer indemnifies the financier for the residual value at the end of the lease term. If the residual value was set to ATO guidelines, the customer has some comfort that the price at auction will be sufficient to cover the residual value, it is the customer's responsibility to make up the shortfall.
• If the customer accepts the financier's offer to purchase the asset, the financier may consider financing the goods (minimum amount applies and finance is subject to credit acceptance).

Benefits to Business

• Preserve your working capital – immediate access to equipment without upfront payment.
• Easier cash flow management – payment terms can be matched to the customer's income.
• Won't tie up existing assets – the financier owns the goods and the customer is leasing its use.
• Tax benefits – may apply.

Tax Benefits

Depending on a customer's individual circumstances an upfront tax deduction may be available to a 'Small Business Tax Payer' (i.e. average annual turnover of less than $1,000,000 and depreciable assets with a written down value of less than $3,000,000 at the end of the relevant year) who makes a pre-payment of lease payments prior to the end of their tax year.

Goods and Services Tax (GST)

Under a Finance Lease, the financier is the purchaser and owner of the asset and hence is entitled to claim the Input tax Credit (ITC). The amount financed on the asset will be net of the ITC claimed by the financier. GST is payable on the rental payments over the life of the contract and the residual amount.

• GST is paid on all fees and charges.
• If the customer holds an ABN they may be able to claim any GST as an Input tax Credit (ITC) each month or quarter.

Need more information?

If you would like to learn more about a Finance Lease, please call our Customer Service Centre on 1300 887 967 or submit your question using our enquiry form and a member of the Madison Team will contact you to answer any questions.

You can also request an online quote or apply online for a Finance Lease.

Once you've heard what we can offer in terms of our range of competitive products and specific contract details, you'll have the confidence to know you've made the right decision.