Lease Market in Australia- Akarshi Jain,- Roll no. – 858- B.B.A, LL.B.(Hons.)

Origins of Lease Market in Australia Presently equipment financing consists of:i. Leasingii. Hire Purchaseiii. Chattel Mortgage Lease – A late 1950’s phenomenon. Predominant equipment financer groups Domestic & International Banks Captive Financiers

Finance Companies Fleet leasing companies Rental companies In early years, lease financing mostly motor-

vehicle related. More recently, office equipment have grown

strongly.

Leasing as a financial tool For Income Tax purposes, no option can

be there for the lessee to purchase the leased goods at the end of the term.

However, the lessor may re-lease or make an offer for the goods.

Financial lease provides for the lessee to indemnify the lessee in case of any loss on sale for less than the residual value.

Lessee can claim the full amount of lease rentals as a tax deduction.

The lessor, being the owner, claims the depreciation and any investment incentives

Government Policies Currently, it is necessary for the lessor to

be confident that the value of the equipment when returned by the lessee will achieve a resale price which is predictable.

GST introduced on 1 July, 2000 which focuses on flexibility.

Taxation of Financial Arrangements (TOFA) Personal Property Securities (PPS)

Proposals Pending IASB and FASB issued ED 2013/6 Leases. It seeks

to:i. Amend the definition of lease.ii. A new classification system for leases.iii. So that lease is recognized as assets or

liabilities on the balance sheets.

iv. “Right to Use” approach – to recognize payments under the lease contract as a liability and recognize the right to use the underlying asset as an asset in its statement of financial operation.

v. Lessors have new requirements about whether they have retained the risks and benefits inherent in the asset.

General Equipment Finance, 2012

General Equipment Finance, 2012For new businesses in 2012 within the general equipment financing, Leasing accounted for 19% of the total

portfolio, hire-purchase being 19% and chattel mortgage was 62%.

A little over a third of leasing is operating leases, with finance leases being the remainder.

Total Equipment Finance, 2012

Product Type

General Equipment FinanceBy Equipment Type, 2012, $84.5 bn(Excluding Fleet Leasing)

Recent Trends in Equipment Financing

Trends in Equipment Financing

Although the Investment Allowance was phased out in December 2009, new business levels did not subsequently slump.

Volume in the June quarter 2010 was down only 5% on the December 2009 quarter.

In 2011/12 each quarter showing an increase on the corresponding period in 2012.

The total equipment finance volume in 2012 of $43.7 billion increased by 6% as compared to $41.3 billion in 2011.

Thank You!Any Questions?