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NRJ Partners Chartered Accountants Tax and Business Advisors are able to provide strategic advice and facilitate your commercial and business finance solutions throughout Australia.

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Chartered Accountants Melbourne - Commercial and Business Finance

NRJ Partners are able to arrange and negotiate your business and commercial finance solutions.

We actively assist in preparation of proposals for financial institutions, enhancing outcomes, perception of risk and ultimately risk premium charged.

We have established relationships with a network of debt and equity providers with the time, expertise and resources to negotiate the most favourable capital structures for your commercial or business finance situation as quickly as possible.  Debt finance based on low interest rates, tax effective structures with minimal conditions and a high level of service. Business finance for expansion, investment funding, leasing, purchase or refinance of commercial properties, retail shops, industrial land, factories and offices or cash flow lending.

Using a finance broker

Instead of you trailing from lender to lender, interviewing with various equity providers, making endless phone calls or trawling the internet, a finance broker can do it all for you. If you chose the go-it-alone route, you might be lucky to compare three or four different products or funding providers. Brokers can compare hundreds! 

A good broker will also help you to understand the various deals that are on offer, explaining all the features and details that might make a big difference to your repayments, funding terms, and security requirements. And what’s more, your broker will lodge your application (in many cases electronically, saving time) and chase it through with the lender – so you don't have to! Your broker is the single point of contact for you throughout the process.

While using a finance broker can result in substantial savings in time and money for borrowers, choosing the right finance broker is the key.

Checklist for choosing a finance broker

Our checklist can help you make this important decision. Your broker should be:

  • A full-time mortgage specialist .
  • A member of the Mortgage Industry Association of Australia (MIAA) .
  • Part of a reputable company network with Head Office support and professional training .
  • Free of charge .
  • Happy to disclose fees and commissions .
  • Covered by professional indemnity insurance .
  • Have access to a broad panel of financial institutions (20+).
  • Have specialist software to compare home loan products, qualify borrowing power, and electronically submit loan applications to lenders .
  • Have a detailed customer charter setting out how they work.

Commercial loans

We are able to facilitate commercial finance solutions tailored to your needs from a choice of Australia ’s top commercial lenders.

We can provide finance for most commercial property transactions from the simple to the complex.

Accredited Commercial Specialists can assist with commercial lending advice on:

  • equipment and motor vehicle finance
  • business loans
  • debtor finance
  • commercial property finance
  • property development.

We act as your commercial finance specialist to help you structure the deal correctly, advise you each step of the way, and help you obtain market competitive rates from a choice of top commercial lenders.

Whether you’re looking for a business loan, finance for a commercial property, or a equipment or motor vehicle lease, we can help

Financing and Leasing

Leasing Versus Buying

(Equipment, Vehicles, Plant, Computers)

Leasing is really just another form of borrowing to finance something. But unlike loan finance - where you take ownership of the equipment/asset and offer it or something else as security to the financier as security, lease finance sees the financier take ownership and gives you the use of the goods under contract for a specified period. There are two main issues affecting the cost of your new asset and the returns it generates. The first is the interest rate and repayment structure you choose, the second is the tax implications involved.

Your first objective is to structure competitive financing freeing up your working capital and generally you would do this in conjunction with the advice of your accountant or relevant advisor. You don't want to have cash locked up in depreciating assets as it reduces your sources of flexible capital you can call on at any time. There are different methods of financing or leasing dependent upon your business need.  Here are some considerations:

The effect on your cash flow

When you're looking to finance new equipment, your first consideration should be how it will impact your business. The best way to assess this is with the help of your accountant, to prepare a cash flow report so you can easily see how the new financing will affect your bottom line. Some points worth keeping in mind when setting up a cash flow statement:

Matching repayments with the useful life of the asset

Knowing how and when your equipment will generate income will help you determine the best way of paying for it. Remember, in many cases a new asset may not produce cash flow immediately or regularly.

Before organising finance, you should also consider the expected productive life of an asset. That way you can upgrade or add to your asset so you won't finish paying for a piece of equipment long after its useful days are over. Alternatively, you don't want to be paying for an asset too quickly and putting unnecessary strain on your cash flow.

Taxation Notes

If your investment in new plant and equipment produces assessable income, there are two main tax considerations that could influence your finance choice: the tax deductibility of loan interest or rental payments and the depreciation of the equipment itself.

Deductibility

If you use a hire purchase or equipment loan arrangement to acquire a new asset, the loan charges and interest component of your repayments may be tax deductible. Typically within the repayments, the interest component is usually higher than the principal during the early part of the agreement. This can lead to higher deductions in this period. With a finance lease however, the entire amount of your rental payments may be treated as a tax-deductible expense.

That is why you should check that if you don't require high deductions in the early life of the goods you acquire, it may be prudent to lease the goods as the payments are equal over the life of the lease.

Depreciation

Most assets depreciate in value over time. This could offer tax advantages because the annual depreciation could be an allowable tax deduction.

If you finance an asset with an equipment loan, you legally own the asset and lenders take a mortgage over the asset as security. With a hire purchase, you own the asset after you have made all the repayments. In both cases however, you can claim depreciation and interest as a tax deduction.

On the other hand, if you lease an asset via a finance lease you cannot claim depreciation, as the financier is the legal owner of the asset. But, the rental payments may be tax deductible.

You should always seek advice from your accountant on the depreciation and taxation rules and how they apply to your particular business and equipment.  For more specific information on different types of leasing & financing:

1. Hire Purchase Agreement
2.
Novated Lease
3. Finance Lease
4. Operating Lease
5. Chattel Mortgage

Hire Purchase Agreement

Purpose

A Hire Purchase arrangement is an agreement to purchase a vehicle subject to payment terms to the finance company. You will automatically own the goods when you pay the final payment, different to a lease.

How it works

Term: The term of finance agreement can be from 1 - 5 years.

Deposits: Deposits are not required. You might choose to trade in an existing vehicle in order to put in a deposit to reduce the amount to be financed.

Residual/Balloon: You can choose to have a balloon payment as the last payment of your finance agreement. This balloon payment is usually between 10% - 40% of the cost price, but may be as low as one dollar, dependent upon the equipment. This decision is usually influenced by the level of monthly payments you are comfortable with.

Owner of the goods: The financier retains legal title (ie: owns the goods) during the term of the agreement. You automatically secure ownership upon payment of the final instalment.

Accounting Benefits: For income tax and GST purposes, a hire purchase agreement is treated very differently to a finance or operating lease. Under GST, a hire purchase agreement is treated as a "taxable supply" on the commencement of the arrangement between the hirer and the financier.

With a hire purchase arrangement, there is deemed to be a sale of the equipment from the financier to the hirer, the GST liability arises at the commencement of the arrangement. Even though the total amount payable under the agreement will be paid by periodic installments and ownership of the equipment will not pass to the hirer until the final repayment. The financier, being the supplier, is responsible for the payment of the GST liability.

Therefore the amount financed is inclusive of GST, and your monthly repayments are not subject to GST unless you are on a cash basis for GST. (Seek advice from your accountant). You can claim the interest component of all repayments. The depreciation of the goods is fully tax deductible providing goods are used 100% for business purposes.

The goods you purchase become an asset that shows on your balance sheet for your business. The goods will also be a contingent liability until the end of the finance agreement. You may be liable to pay fringe benefits tax and should refer to the ATO at: www.ato.gov.au/businesses for further information)

You should always seek advice from your accountant on the rules and how they apply to your particular business and equipment.       

Novated Lease

Purpose A novated lease is used for employees who have the option of receiving a car as part of their salary package. The employer pays all rental payments to the financier on the employee's behalf and the employee enjoys full use of the motor vehicle.

How it works

Term: The term of finance agreement can be from 1 - 5 years and must be in accordance to Australian Taxation Office Guidelines (ATO).

 

Novation: The employee then novates the lease to their employer, who assumes all the employee's rights and obligations under the lease, including responsibility of meeting the lease payments, normally deducted as part of the employee's salary package.

 

Deposits: Deposits are not required. The full purchase price must be financed.

 

Owner of the vehicle: The contract is in the name of the employee who remains the registered owner throughout the lease and keeps effective control of the vehicle at all times. If the employee leaves the company, the vehicle remains with the employee. In this situation, generally the employee takes over the payments or gets another employer to make the payments. This means, the original employer is not left with an unwanted car and the employee keeps the vehicle.

Residual/Balloon: You must have a residual payment as the last payment of your finance agreement according to ATO Guidelines. This usually varies between 37% to 75% of the cost price of the vehicle). This amount usually represents the approximate value of the goods at the end of the lease. A residual payment allows for lower monthly payments and leaves you with more working capital to run your business. You may refinance this residual value at the end of the contract (depending on the finance company). The following range of residual values may be a useful guide for Finance Lease transactions, which fall within the guidelines issued by the ATO:

Terms

Residual Value

1 Years

65.50% - 75.0%

2 Years

56.25% - 65.00%

3 Years

47.00% - 55.00%

4 Years

37.50% - 45.00%

 

Accounting benefits: The monthly rental payments are 100% tax deductible, providing the goods are solely used for business purposes. The amount financed is exclusive of GST (the finance company covers this cost as they are purchasing the goods for the employee). The monthly rental payments are subject to GST and stamp duty. The residual value and early termination are also subject to GST. Employers can attract employees by offering a vehicle as part of a remuneration package, without having it appear on their balance sheet. However you may be liable to pay fringe benefits tax (Please refer to the ATO at: www.ato.gov.au/businesses for further information).

You should always seek advice from your accountant on the rules and how they apply to your particular business and equipment

Finance lease

Purpose Available for companies and business professionals to allow them to use business goods such as motor vehicles, trucks, industrial plant, professional or earthmoving equipment. So rather than tying up funds in depreciating assets, you can put your money into what you do best.

A finance Lease is a rental agreement, where the finance company purchases the goods for you and you rent it from them for an agreed monthly repayment. The finance company owns the goods at the end of the agreement. It is important to note that there is no option for you to purchase the goods either during or at the end of the agreement. However most finance companies will consider an offer from you to purchase the goods for the residual value at the end of the lease term.

How it works

Term: The term of the finance agreement can be from 1 - 5 years and must be in accordance with ATO Guidelines.

 

Deposits: Deposits are not required. The full purchase price must be financed.

 

Residual/Balloon: You must have a residual payment as the last payment of your finance agreement according to Australian Taxation (ATO) Guidelines. This varies between 25% to 65%. This amount usually represents the approximate value of the goods at the end of the lease. A residual payment allows for lower monthly payments and leaves you with more working capital to run your business. You may refinance this residual value at the end of the contract (depending on the finance company).

 

Lease agreement: sets out the:

  • residual value of the goods
  • term of the lease in months
  • monthly rental
  • depreciation rate

Owner of the goods: The finance company retains legal title during and after the term of the agreement. However, in most cases, the finance company will usually consider your offer to purchase the goods at the agreed residual value at the end of the lease term. Title of the goods will then be transferred to you as the new owner.

While not usually pursued, legally, the goods should be returned to the finance company at the end of the term. The finance company would then auction the goods and you must pay for any shortfall between the sale price and the agreed residual value.

Accounting Benefits: The monthly rental payments are 100% tax deductible, provided the goods are solely used for business purposes. The amount financed is exclusive of GST (the finance company covers this cost as they are purchasing the goods for you). The monthly rental payments are subject to GST and stamp duty. The residual value and early termination are also subject to GST. The goods need to be shown on the balance sheet as both an asset and liability. However you may be liable to pay fringe benefits tax for any private use of the financed goods. (Please refer to the ATO at: www.ato.gov.au/businesses for further information).

You should always seek advice from your accountant on the rules and how they apply to your particular business and equipment.

Operating lease

Purpose An Operating Lease, Equipment Rental or Rental Agreement is a versatile option for financing high depreciation, short life span new technologies such as computers, telephony and all other office equipment which generally have a short lifespan due to high obsolescence. The finance company purchases the equipment and rents it to you for an agreed payment schedule over a fixed term. Whilst similar to a Finance Lease, an Operating Lease has greater flexibility.

It provides the ability to upgrade to new technology through a simple variation of your existing contract (certain criteria applies). This variation can be implemented during the initial term of the agreement. You can add in pieces of equipment and if required replace or upgrade equipment. You can choose to have maintenance software installation and other intangible items included in the agreement.

How it works

Term: The term of finance agreement can be from 1 - 5 years and must be in accordance to ATO Guidelines.

 

Deposits: Deposits are not required. The full purchase price must be financed.

 

Residual/Balloon: You must have a residual payment as the last payment of your finance agreement according to ATO Guidelines. This residual value is determined by the finance company and the finance company is responsible for paying it. Be aware that the residual values are generally not disclosed to you.

 

Owner of the goods: You have possession and use of the equipment, however, the finance company shoulders most of the risk of ownership.

Expiry of Rental Period: At the end of the Rental Period, you have a number of options:

  • Return the goods to the finance company, without any responsibility for loss incurred by the finance company for the resale.
  • Return the goods to the finance company and enter into another agreement on new upgraded equipment.
  • Purchase the equipment at a fair market value (usually very low due to the high depreciation of the equipment).
  • Re-rent the goods at a lower rate for a further term

Accounting Benefits: Rental payments are 100% tax deductible because they are treated purely as an operating expense - the equipment must be used solely for business purposes. Rentals do not appear on the balance sheet, therefore there is no contingent liability. Rental payments are subject to GST, with the amount financed being exclusive of GST. However you may be liable to pay fringe benefits tax (Please refer to the ATO at: www.ato.gov.au/businesses for further information).

You should always seek advice from your accountant on the rules and how they apply to your particular business and equipment.

Chattel Mortgage

Purpose As an alternative to leasing or hire purchase, a Chattel Mortgage or Bill of Sales arrangement is a fixed interest rate loan with security provided by a mortgage over the relevant equipment / vehicle etc. This solution is particularly favourable for those businesses that wish to retain the equipment at the end of the term and account for GST on a cash basis. A Chattel Mortgage, unlike a lease or Hire Purchase Agreement, gives you immediate ownership of the asset from the beginning of the loan. Apart from mortgage stamp duty, the contract or repayments do not attract GST or stamp duty.

How it works

Term: The term of finance agreement can be from 1 - 5 years.

 

Deposits: Deposits are optional. You may, however, choose to trade in an old vehicle or put in a deposit to reduce the amount to be financed, thereby reducing your monthly payments.

 

Residual/Balloon: You can choose to have a balloon payment as the last payment of your finance agreement, but it also can be the first month's payment. This balloon payment is between 10% - 40% of the cost price. A balloon payment allows for lower monthly payments and leaves you with more working capital to run your business.

 

Owner of the goods: Ownership remains with you throughout the term of the loan. Similarly to a consumer loan however, the vehicle is mortgaged to the finance company. The mortgage is discharged after the final payment has been made and you retain the equipment.

Accounting Benefits: You can elect to pay the GST portion of the invoice price from working capital or fund it as part of the loan amount (the loan can be structured so that when the income tax credit is received, from your next BAS lodgment, it is repaid off the loan to reduce the debt). The interest components of all repayments are fully tax deductible provided goods are used 100%for business purposes. The depreciation on the goods is fully tax deductible.

A Chattel Mortgage attracts added upfront fees and varies between the different finance companies. However you may be liable to pay fringe benefits tax (Please refer to the ATO at: www.ato.gov.au/businesses for further information).

You should always seek advice from your accountant on the rules and how they apply to your particular business and equipment.


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