Lease market in australia


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Lease market in australia

  1. 1. Lease Market in Australia - Akarshi Jain, - Roll no. – 858 - B.B.A, LL.B.(Hons.)
  2. 2. Origins of Lease Market in Australia  Presently equipment financing consists of: i. Leasing ii. Hire Purchase iii. Chattel Mortgage  Lease – A late 1950’s phenomenon.  Predominant equipment financer groups  Domestic & International Banks  Captive Financiers
  3. 3.  Finance Companies  Fleet leasing companies  Rental companies  In early years, lease financing mostly motor-vehicle related.  More recently, office equipment have grown strongly.
  4. 4. 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.
  5. 5.  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
  6. 6. 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)
  7. 7. 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.
  8. 8. 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.
  9. 9. General Equipment Finance, 2012
  10. 10. General Equipment Finance, 2012 For 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.
  11. 11. Total Equipment Finance, 2012
  12. 12. Product Type General Equipment Finance By Equipment Type, 2012, $84.5 bn (Excluding Fleet Leasing)
  13. 13. Recent Trends in Equipment Financing
  14. 14. 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.
  15. 15. Thank You! Any Questions?