Hire Purchase Agreements Posted on July 11, 2012 - 1:39 am by Sliver and Young New rules planned for Hire Purchase Agreements Small businesses registered for GST can currently claim GST credits on the finance of assets for business purposes in the following situations: If you purchase the asset through a Chattel Mortgage, you can claim the whole of your GST credits at the time of the first payment, whether your business reports on a cash or accrual method for GST purposes. If you lease the asset, you cannot claim GST credits on the leased asset, but you can claim the GST included in each lease payment at the time of making each lease payment; If you purchase the asset through a Hire Purchase agreement, you can claim the principal component of your repayments (excluding interest): If you use Cash Basis reporting, you claim back GST credits over the life of the agreement, on each If you use Accruals Basis reporting (i.e. non-cash basis), you claim back the whole of your GST credits in the reporting period for the first payment. This has meant that small businesses using Cash Basis reporting are disadvantaged compared to those using Accruals Basis reporting. New rules are planned from 1 July 2012 for new Hire Purchase Agreements entered into from 1 July 2012. From that date you will be able to claim the whole of the GST credits at the time of the first payment, whether you use Cash Basis or Accruals Basis reporting.