For the purposes of GST, and financing of assets - finance vs operating lease

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EthanATO · Answer

Hey , It depends on the conditions of the agreement the business entered into. There's a bit of an explanation on the differences between hire purchases and leasing in the link you sent. To summarise, a hire purchase is where the business agrees to purchase the goods through instalments and they don't own the supply until the final payment has been made. The difference between this and a leasing arrangement is that under a lease the business will not own the asset at the end of the arrangement, nor does it have any obligation to purchase it. Often a business will be given the option to purchase the asset at the end of the lease, but this is treated as a separate purchase. For a business reporting on a cash basis, under a hire purchase GST credits can be claimed upfront whereas under a lease the credits can only be claimed for amounts paid in each tax period.

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