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This Report covers the activities of the Australian Equipment Lessors Association for the two years 2007 and 2008. This period has been both particularly busy and satisfying for AELA and its members, with a number of significant long term objectives being realised during this time.
As the equipment finance association, it is AELA’s role to ensure that the regulatory framework allows members to provide a dynamic range of financing products for the acquisition and utilisation of capital equipment. A wide spread of funding options provides a spectrum of choice, enabling clients to select the level of risk and service they require; at one end of the spectrum the client can assume the asset risk and operating costs associated with the equipment, whilst at the other end the risks and administration can be assumed by the equipment financier. In between, the client can select the combination of risk and service that suits their particular needs.
It is therefore very pleasing to be able to report substantial regulatory reforms in the recent period which will assist AELA members in offering innovative and dynamic funding solutions and three examples are illustrative. After a long gestation period the framework to establish a new taxation of financial arrangements regime nears finalisation; importantly, leasing has now been excluded from this regime, whereas in the original draft legislation it was included. Accordingly, leasing will continue to offer its tax benefit transfer capability. Also a new Division 250 of the Income Tax Assessment Act has been introduced, containing important exemptions for both operating and finance leases, ensuring an efficient regime for leasing to tax-preferred entities.
Another significant achievement is the now almost complete abolition of stamp duties on leasing, hire purchase and chattel mortgage, the culmination of more than a decade of AELA’s efforts; this is a significant microeconomic reform initiative for the Australian economy.
Viewed in totality the range of developments during the period under review are significant, and include:
– the abolition of most state/territory stamp duties on leasing and hire purchase;
– exclusion of finance leases from the taxation of financial arrangements regime, maintaining leasing’s tax benefit transfer capacity;
– new Division 250 of the ITAA for leasing to tax-preferred entities, replacing Division 16D;
– finalisation of the Tax Office practice statement on hire purchase apportionment;
– the development of the Personal Property Securities regime, ensuring priority for AELA members security interests in assets and increased efficiency;
– implementation of the new anti-money laundering regime;
– holding of the Annual AELA Leasing and Equipment Finance Conference;
– conducting the AELA/Amembal Leasing Schools in Sydney and Melbourne;
– holding of the AELA Credit Skillls Workshops in Sydney and Melbourne.
The economy in the year ahead is obviously going to be most challenging. The turmoil in financial markets has become particularly marked in recent months. Since August 2008 we have seen a significant easing in monetary policy as the focus switched from containing inflation to preventing an economic contraction. Fiscal policy has also moved to expansionary and includes a short-term 10% Investment Allowance. Notwithstanding these official developments, funding markets both wholesale and retail, remain dislocated and consumer confidence and business sentiment are low. Against this uncertain economic outlook, new equipment financing volumes are down significantly on the previous record year.
The period ahead will also be a challenging one on the regulatory front, as outlined in the body of this Review, particularly if proposals to include lending to small businesses and for investment purposes within consumer credit regulation are proceeded with. AELA has a strong capacity to meet these challenges. It is a strong and cohesive association, well-supported by its members. The AELA Directorate is skilled and experienced, with the recent achievements underlying the Directorate’s ability to greatly assist members. The AELA Council, the guiding body of the association, consists of vastly experienced and knowledgeable equipment financiers. This combination will continue to serve AELA well.
David Hollis
2006/2007 Chairman
John Dennis
2007/2008 Chairman
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