Komatsu Corporate Finance Products

Home » Products » Hire Purchase

HIRE PURCHASE

Hire Purchase can be used to finance up to 100% of the equipments value (excluding GST).
Up front deposits and trade-in's allow the customer (the Hirer) to reduce the amount financed by Komatsu Corporate Finance (the Owner) and hence reduce the Hirer's repayment commitment.

Under a Hire Purchase contract Komatsu Corporate Finance remains the legal owner of the equipment until all payments have been completed. 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).

QUESTION	ANSWER
Is it on or off the Hirer's balance sheet ?	On balance sheet
What portion of the installments are expensed for Australian Accounting Standard purposes?	The interest component of each rental is expensed.
What proportion of the installment is tax deductible ?	The interest component of each installment will generally be tax deductible. However, the Hirer can also claim depreciation deductions on the equipment.
Are up front deposits allowable ?	Yes.
Must there be a residual value (balloon)?	No. A residual/balloon is not compulsory.
When is Goods & Services Tax payable ?	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. If the interest rate and terms charges are not disclosed, the Hirer must pay 10% of the sum of all installments 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 installments.

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. Please refer to the Terms and Conditions of Use of this Web Site.