An agreement that covers most of the useful life of the asset and is based on the lessee guaranteeing the residual value of the leased asset at the end of the term. The lessee bears the responsibility of ownership and the value of the goods are shown on the lessee’s balance sheet less depreciation. The future rentals are shown as a liability. The Australian Tax Office dictates the effective life of an asset and the relevant depreciation value.
The ATO also provides guidelines for the minimum accepted Residual Value for the various depreciation rates.
Disclaimer: The above is a generic representation only. It does not constitute financial advice or mortgage structuring advice. It is only to be used as a guide only. Please discuss your financial needs with a financial planner, accountant or your banking representative.
No reliance should be placed on the above information.