Claim GST credits sooner on HP agreements

• Currently, claiming Goods and Services Tax (GST) credits on the purchase and finance of an asset depends on the method of finance and your reporting basis for GST.
  
• GST credits can be claimed on the purchase of an asset through a Chattel Mortgage at the time of the first payment regardless of whether the business reports on a cash or accrual method for GST purposes.
  
• A small business cannot claim GST credits on leased assets, as the assets are not owned by the taxpayer. However, the GST included in each lease payment can be claimed at the time of making the payment.
  
• GST credits can be claimed on the purchase of an asset through a Hire Purchase (HP) Agreement as follows:
   
• Cash Basis Reporting: GST is claimed back over the term of the financing arrangement;
• Accruals Basis Reporting: GST is claimed back at the time of the first payment.
  
• From 1 July 2012, proposed amendments to the legislation will mean small businesses that report on a cash basis for GST purposes and enter into a hire purchase agreement, will be able to claim the full GST credits at the time of the first payment.
  
• This concession will only apply to new hire purchase agreements entered into from 1 July 2012. Any hire purchase agreements entered into before this date will be governed by the previous legislation.