What is the residual on a farm machinery lease, and who pays it?
The residual is the balloon payable at the end of a finance lease to keep the machine, often a set percentage of the cash price. It is a real future cost, so its present value belongs in the lease. Where the residual is guaranteed and the machine is worth less, you pay the difference.
How do you use this in your decision?
Put your own quote, loan terms and lease terms into the sheet on the home page. It shows the three options in today dollars, the deduction timing year by year, the GST credit quarter and the machine's value at the end, then names the cheapest on your figures and by how much. Every rate, residual and effective life is labelled an assumption for your accountant.
Which rules sit behind the tax treatment?
The tax treatment of the decision is the work of a registered tax agent. See the rules that apply to you for the held obligations under the Tax Agent Services Act 2009 (Cth), cited to their clauses.
Frequently asked questions
Why does the sheet discount the residual instead of adding it on?
Because a residual paid in five years is not the same cost as a residual paid today. The sheet carries it as a discounted future cost on the settlement date you enter, so the lease is compared with the buy on the same footing. Where the residual is guaranteed, a shortfall against the machine's value at the end is a real cost of the lease.
Where do I find the residual on my lease?
On the dealer's lease document, as a percentage or a dollar figure, and the sheet asks for both forms. It never defaults a residual: a blank residual is named and returns scope incomplete.
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