FAQ: What are the tax & GST implications of a Car Lease (Finance Lease)?

What are the tax & GST implications of a Car Lease (Finance Lease)?

GST is payable on both the monthly payment and the residual value of your car lease. If you are registered for GST then some or all of the GST may be claimable as an Input Tax Credit on your next Business Activity Statement (BAS).

If the amount financed for the vehicle is below the Depreciation Limit, as set by the Australian Tax Office (ATO), the lease rental can be claimed as a tax deduction.

When the amount of finance on the vehicle is above the vehicles Decpreciation Limit, then you can claim the interest charges on the lease and on the depreciation up to the value of the Depreciation Limit. A Car Lease differs from a Commercial Hire Purchase, under which the interest and depreciation is tax deductable.

On each Business Activity Statement (BAS) the payments made as part of your Finance Lease must be reported. Each individual payment is treated as a separate purchase, even though the payments are for the same vehicle under your lease agreement.