| Financing Arrangements: Input Tax Credits |
| Taxpayers are entitled to claim input tax credits (ITC) in respect of lease payments made under a financing arrangement. |
The availability of the ITCs varies depending on the type of arrangement entered into and whether the taxpayer accounts on a cash or accruals basis for GST.
Finance or operating lease
- Under the accruals method, ITCs are claimed periodically as the individual payments become due over the course of the lease term.
- Under the cash method, ITCs can only be attributed if the payment has actually been made (for accruals, the holding of a tax invoice is sufficient).
Hire purchase (HP)
- Under the accruals method, available ITC can be claimed up front as a lump sum.
- Under the cash method, any available ITC is spread out over the term of the HP agreement as payments are made.
Chattel mortgage
- As the goods are actually acquired, available input tax credits are claimed up-front as a lump sum.
25th-April-2004 |
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