A capital lease is a commercial finance product that enables a financier to purchase energy efficiency equipment on behalf of your business. The business makes regular payments to the financier to lease the equipment but, as the payments are considered instalments, the business owns the asset for accounting purposes.
No upfront capital or security
Capital leases allow for energy efficiency projects to be undertaken without a business requiring upfront capital or using existing business assets as security.
Realising savings now
Businesses that use finance for their energy efficiency projects can realise immediate cash flow benefits. Energy efficiency projects can result in higher savings than financing costs.
Tax and accounting
As the business is considered to be the owner of the asset for accounting purposes. The business may be able to claim depreciation of the asset. Further, the interest payable on the debt may be deductable at the company tax rate. Seek specific tax and accounting advice for your particular situation.
As the business is considered the owner of the asset, the business bears the risk associated with owning the asset.
Businesses can also receive a discount on energy efficient products that are installed by accredited Victorian Energy Upgrade (VEU) providers. A list of these products and providers can be found on the ESI website.
Visit victorianenergysaver.vic.gov.au for more information.
The Clean Energy Finance Corporation (CEFC) has developed a capital lease finance offering with co-financiers which specifically targets the energy efficiency needs of small businesses, manufacturers, the agricultural sector and small-scale commercial property.
Capital lease finance identifies technologies that meet the CEFC’s investment guidelines and offers a capital lease with 0.7% discount comparable to standard capital lease products. This program is offered by a range of financiers.
Visit https://www.cefc.com.au/where-we-invest/asset-finance.aspx for more information.
Correct as at January 2018.
Level 28, Urban Workshop,
50 Lonsdale Street, Melbourne VIC 3000
Phone (03) 8626 8700
Published by Sustainability Victoria.
Sustainable Finance – Capital Lease
© Sustainability Victoria January 2018
Disclaimer: The information provided in this document is general advice only. It does not take into account your particular needs or objectives and does not constitute legal or accounting advice. Accordingly, any comments or statements made are not a recommendation that a particular course of action is suitable for you and you need to seek your own legal, tax and accounting advice in relation to your specific circumstances.
This information is true and correct as of January 2018
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