Purchase of Equipment by the Financier In leases and hire
purchases, the Financier generally pays GST on the drawdown of the items of
equipment. The Financier is entitled to claim ITC.
For a lease, the Financier can claim the full ITC except for the following
restrictions. The amount of ITC the Financier can claim on the purchase of a
luxury car is equal to
1 / 11 × Luxury Car Depreciation Limit
For a hire purchase, the Financier can always claim back the full amount of
ITC. However, the amount of ITC that the Hirer can claim is subject to the same
limits as the Financier in a lease. This will affect the ITC Recoupment
calculation.
For an equipment loan, AFQS does not model any GST on the equipment
purchase. Therefore no ITC is applicable.
Payment of Transaction Fees by the FinancierThree types of fees
are modelled by AFQS: fees with each drawdown, fees with each rental and fees
with each residual. These fees are paid to a third party by the Financier and
are treated as a tax-deductible expense for the Financier.
AFQS assumes that GST is charged on these fees.
For leases and hire purchases with no interest disclosed, the Financier will
be eligible to full ITC on all GST paid on the fees.
For equipment loans and hire purchases with interest disclosed, the
calculation depends on the rates stored in the Reduced ITC Rates table.
For equipment loans, the supply is input taxed. The Financier can claim
reduced ITC (RITC) equal to
GST Paid × RITC Rate
For hire purchases with interest disclosed, the supply is part taxable, part
input taxed. There is considerable uncertainty about how RITC should be
calculated, and different Financiers are using different methods. AFQS
calculates the ITC according to the Calculate RITC by Apportionment checkbox.
If checked, the GST on fees is split into interest and capital components on
a pro-rata basis. The Financier is eligible to 100% ITC on the capital
component, and RITC Rate percent on the interest component.
If not checked, the Financier can claim RITC equal to
GST Paid × RITC Rate
that is the same amount as for equipment loans.