Finance options for IT purchases

Posted on:

Finance options for ITIf you are putting off that necessary IT upgrade or implementation because of cashflow, you don’t have to.  

You may not be aware that you can finance pretty much anything relating to IT including telephone systems, desktops, servers and even software.

If you are weighing up the pro’s and con’s of financing vs straight purchase, we’ve put together this nifty little table to help you work out the best option for you.  Centrix can help you with purchasing your IT using finance, please contact us to find out more

Rental / Operating Lease Finance Lease Commercial Hire Purchase (CHP)
Amount Financed & GST Your repayments are calculated on the GST EXCLUSIVE amount. GST is then added to the payments and can be claimed as an Input Tax Credit. Your repayments are calculated on the GST EXCLUSIVE amount. GST is then added to the payments and can be claimed as an Input Tax Credit. Your repayments are calculated on the INCLUSIVE GST amount. No GST is added to your repayment amount.
Flexibility Upgrades & add-ons Very Flexible
You can easily add or upgrade throughout the term. Repayments can also be structured to remain the same.)
Not So Flexible
You cannot upgrade or add-on without starting a new lease. (A payout of the existing lease would apply)
Not So Flexible
You cannot upgrade or add-on without starting a new CHP. (A payout of the existing CHP would apply)
Residual You do not have a residual obligation. (The lender holds the residual risk.) An agreed residual amount is due at the end of the contract term. A final balloon payment is an optional facility with Hire Purchase contracts.
Ownership The goods are rented to you, where at the end of term, you can return, rerent or make an offer to purchase the goods for an agreed amount. Ownership is agreed and guaranteed once your repayments and residual amount is paid. Your ownership starts at the beginning of the Hire Purchase term. Your contract is completed upon payment of all repayments including final balloon.
Tax Implications Your repayments, Ex GST, are 100% tax deductible when used for business purposes. Your repayments are 100% tax deductible when used for business purposes. The interest component of your repayments and the depreciable amount of the equipment is deductible, as per the ATO parameters.
Accounting Implications Your repayments can be treated as an operating expense and not noted on your Balance Sheet. (Your rental expense and commitment should be disclosed in the notes to the accounts.) Your Finance Lease liability is noted on your Balance Sheet. Your Hire Purchase commitments and the full asset value are accounted for on your Balance Sheet.
*We always recommend that clients seek their own independent financial, legal and accounting advice before proceeding with any financial transaction. The information provided above is a guide only and subject to change without notice.