Commercial Hire Purchase, a loan used for goods that are mainly used for business use (usually 50% or greater) such as equipment, machinery and motor vehicles. It is also be known as a Corporate Hire Purchase, Asset Purchase, Hire Purchase, Offer to Hire, HP or most commonly as a CHP.
A CHP is an agreement where the financier agrees to purchase the car on behalf of the customer and the customer in turn hires the car from the financier over an agreed period of time for a fixed monthly repayment.
The ownership of the vehicle is transferred to the customer only when the final payment has been made.
Under a CHP agreement,the registered owner of the vehicle is the customer and he is responsible for the all costs associated with maintaining, running and insuring the vehicle.
A Commercial Hire Purchase allows the hirer to claim an input tax credit for the GST component of the purchase price, provided that the customer is registered for GST. Where the customer is using the accrual accounting method, the input tax credit may be claimed on the next Business Activity Statement (BAS). If the cash method of accounting is used, the GST can be claimed as an input tax credit over the term of the contract.
In addition to the input tax credit,you may be able to claim the Interest and the depreciation on the vehicle as an expense as well as all running costs (such as petrol,vehicle registration and maintenance)
You will need to seek professional advice from your accountant regarding any tax related queries.
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