For the most part, leases are financing agreements that facilitate the sale and purchase of property. For GST, leases are considered a sale of goods and a separate financing delivery. The provision of the loan by the financier is a financial benefit taxed upstream. If the recipient uses the borrowed funds to purchase the goods, the normal allocation rules apply. Under the new Act, all deliveries of goods or credits under a lease agreement signed on July 1, 2012 are fully taxable, with interest expense recorded separately and disclosed. In the case of a lease agreement concluded before July 1, 2012, you can claim one-eleventh of the main component of each tranche during the period you pay them. If the provider provides periodic bank accounts or statements showing the main components and interest rate components for each tranche, you should use this information to calculate GST balances during the corresponding tax period. If you do not know the main component of each tranche, you must take appropriate steps to find out from the supplier. A company can acquire assets such as equipment by making lease-to-sell or lease-lease contracts to pay for and use the equipment for a certain period of time, instead of paying the full costs in advance. So they also need to know how the GST applies.
Here is some information from the ATO website – As Melinda received the fund under a rental agreement, each rental payment is treated as if it were making a separate purchase for the register of each tax period, while each payment applies to the same register under the same rental agreement. What is the impact of GST when a lease-sale contract is restructured during the currency of the contract, in which the remaining balance is refinanced as a new lease-sale agreement? Example: Leasing contract signed before July 1, 2012 For leases concluded on July 1, 2012, you can claim prepayment tax credits in advance instead of waiting for each tranche to be paid, as you would if you counted the GST on a non-solvent basis. As all components of a lease agreement concluded on July 1, 2012 are subject to the GST, you can use one eleventh of all components, including the credit component and related fees and fees subject to the GST DER agreement.