Recreational Aviation Finance

[Guest Bendorn]

In your experience, have you found it difficult to get finance for your aircraft, especially when you mention the word "ultralight"???

 

Would a finance provider specialising in Recreational Aviation be supported?

 

 

[Matt]

Hi Ben,

 

We had no dramas getting finance for the Sportstar when we bought it despite it being one of the first in the country. There are a number of aviation friendly brokers and lenders - most advertise in the Aviation Trader and similar. You'll probably find the lending criteria to be a bit tighter than for classic GA types i.e. 5 year term instead of 7 or 10, 20% deposit compared to 5% etc.

 

We used our finance broker Finlease who have put us on to Capital Finance for both the Sportstar and the CT4. I'm sure there are others who are also "ultralight" or "light sport" friendly.

 

Cheers,

 

Matt.

 

 

[Guest Bendorn]

Hey Matt.

 

I explored a number of different options and found there was only a couple of lenders who actually knew a bit about the RAA side. Most were pretty up to date with the GA side of things and lacked in our genre.

 

I'd like to see a no-frills RAA finance who know us back to front. Something to look out for in the future perhaps......;)

 

 

[Guest airsick]

I explored a number of different options and found there was only a couple of lenders who actually knew a bit about the RAA side

Maybe post their details here? Or wouldn't you recommend them?

 

 

[K-man]

Our aircraft is financed by Bank of Queensland, although we had to go through a broker to obtain the finance. Ironically we are BOQ customers, yet our manager couldn't get a lease for us. We used Bidgee finance, Deniliquin. Ask for Wendy. www.bidgee.com.au

 

Good luck. :thumb_up:

 

 

[Guest Maj Millard]

I financed my Lightwing purchase through a bizness equipment finance broker (RLA Finance in Townsville) They knew the bloke I was buying the aircraft from. It took a while but they did get it arranged for me. Cheers ..................................

 

 

[Guest Brett Campany]

I'm really looking on how to do all this very soon but I don't have much behind me. I keep getting told that I shouldn't do it and that there's no business in aviation but something's telling me to pull my finger out and arrange something.

 

I'd love as much info on finance dealers and the likes and I believe an RAAus specific financial broker would benefit greatly from pilots all over Australia.

 

 

[winsor68]

What sort of aircraft are you looking to buy Brett? From the little that I have learned about Aviation Finance it seems that they consider aircraft to hold their value quite well which is in our favour...

 

CRS Financial

 

Brett Larson

 

GPO Box 2329

 

Brisbane QLD 4001

 

Phone: 0754936522

 

Fax: 0753026415

 

Mobile: 0418787691

 

Email: [email protected]

 

 

[pudestcon]

I answered "Nah I'm all cashed up". I have a view that anything I do for recreation including 'Big boys toys' should not be purchased with borrowed money. Only borrow money for income or investment purposes where the interest and other costs can be offset against tax. So whilst I'm not really 'cashed up' I will purchase an aircraft with cash money I have saved which means I'm restricted to buying a modestly priced aircraft. Obviously there are some here who appear to be in the market for an aircfraft for business purposes: That is a completely different scenario to what I am talking about.

 

I hope you can see my point of view.

 

Pud

 

 

[Yenn]

Pud. That is really good advice except that a lot of people have recently come unstuck, borrowing to invest.

 

Remember it is hire purchase that keeps the poor man poor.

 

 

[Guest basscheffers]

From the little that I have learned about Aviation Finance it seems that they consider aircraft to hold their value quite well which is in our favour...

What I have learned about aviation finance is quite the opposite of you! Working aircraft have a proven economic life in excess of 40 years. However, those in aviation finance generally only give mortgages for 5 years, with maybe a 30% balloon payment.

I ended up financing it from my own money. In essence this means not having put it into my mortgage so it is much the same as borrowing, really...

 

 

[Guest Brett Campany]

What sort of aircraft are you looking to buy Brett? From the little that I have learned about Aviation Finance it seems that they consider aircraft to hold their value quite well which is in our favour...CRS Financial

 

Brett Larson

 

GPO Box 2329

 

Brisbane QLD 4001

 

Phone: 0754936522

 

Fax: 0753026415

 

Mobile: 0418787691

 

Email: [email protected]

I'm looking at a Texan TC550 from Fly Synthesis. Trying to get the figures sorted out to show the bank but coming up with the initial cash deposit is proving hard. Might have to source an investor or silent partner.

 

 

[pudestcon]

Yenn,

 

I guess it all depends on what you invest in and what due diligence you do - even then you can come unstuck as you have alluded to. Hire purchase is a way for the 'poor man' to get some of those 'capitalist' toys and that will definitely keep him poor. However access to finance (other peoples money) can set you on the path to personal wealth as well. In fact I would say that without access to finance most of the successful business people and other individuals would not be as successful.

 

Anyway, this is way off topic. I apologise and now get off my soapbox:)

 

Pud

 

 

[Guest basscheffers]

I'm looking at a Texan TC550 from Fly Synthesis. Trying to get the figures sorted out to show the bank but coming up with the initial cash deposit is proving hard. Might have to source an investor or silent partner.

I didn't have much luck, nobody was interested. And that was a plane with an existing business, just a change of ownership.

So I ended up paying for it myself. Will have to try and refinance at some point when the missus wants the money back to move to bigger premisses! :big_grin:

 

 

[Guest Brett Campany]

I didn't have much luck, nobody was interested. And that was a plane with an existing business, just a change of ownership.So I ended up paying for it myself. Will have to try and refinance at some point when the missus wants the money back to move to bigger premisses! :big_grin:

I'm just in the process of sourcing various quotes on insurance as well but if I can get this business finance sorted out, I'll be wrapped.

 

 

[johnm]

finance

 

I'd be interested to see if you get any finance using the plane as the collateral

 

My experience was you had to use another asset as the collateral - say the house - I'm sure most financiers see a plane as twisted aluminium on a hillside

 

As one bank manager said to me - 'if it floats, flys or farts' we are not inetersted in financing it

 

If you are lucky enough to be able to claim a portion of the plane (running expenses (and depreciation if you want)) as a business expense - then this eases the finanancial burden a lot

 

good luck with the finance

 

 

[Guest basscheffers]

If you are lucky enough to be able to claim a portion of the plane (running expenses (and depreciation if you want)) as a business expense - then this eases the finanancial burden a lot

10% GST for starters! But it depends on how you set up the business. If you make it a sole trader, then yes, you can deduct the losses from your entire income, including your day job.

However, I've set mine up as a P/L, which means losses accumulate on the company books. Once you break even, those losses are deducted from company tax. In the end, the financial benefit is much the same, but it comes at a much later date.

 

You also need to make sure you have a plan for the business to become profitable; the ATO frowns upon "businesses" set up solely to make hobbies tax deductible! You might get audited one day...

 

 

[johnm]

ATO - yuk

 

agreed

 

if you have a business where you earn money - and your time is money - and your plane saves you time (thats what business class is in the pointy end of the big birds) then I believe that is a good basis - as good as you are ever going to get - for tax compliance

 

then ................... thats a business expense

 

if you are in that position ................ then flying can be much more affordable

 

JM

 

 

[Guest basscheffers]

if you have a business where you earn money - and your time is money - and your plane saves you time

Yup, though in my case, the plane IS the business as it is hired out.

If you use the plane in your main business for transport, then you can't really make a perpetual loss anyway or you wouldn't be able to buy a meal at the end of the day. :)

 

 

[bushpilot]

I thought about financing - and my Bank of Queenland manager (in Bowral NSW) said they were good on financing Jabiru, because of the name and retained value. I ended up buying outright, so never got to the stage of asking about the fine-print, interest rate, etc.

 

 

[Guest Orion]

As far as tax goes a plane is no different to a car, computer or any other plant or equipment used in the earning of assable income.

 

It deductible to the extent of the business use.

 

If in any doubt take it from the CPA & Registered Tax Agent of many years do not take any advice except from your Tax Agent / Accountant.

 

All the comments about tax on this thread show ony a cursory understanding of the issues.

 

Anyone who thinks they are saving money on their recreational flying through the tax system is kidding themselves. If its private use it's not deductible.

 

If the plane is in a company then you the user should be paying a hire fee to the company for the use of the asset. If you don't its probably a fringe benefit and subject To FBT if not then under the recent changes from 1/7/2009 the use will most certainly be a division 7A deemed dividend.

 

If you pay ahire fee then that fee will be income to the company in all cases and deductible to the individual to the extent of the business purpose. In other words private still isn't deductible.

 

Kent

 

 

[skydog]

shares

 

Sharing is a mighty good way to get into plane ownership but it is hard to find a partner and then, right partner. You dont have to be friends but you do have to run the partnership strictly and businesslike.

 

It is still an expensive toy at the end of the day so be prepared to pay for it. Dot the i`s cross the t`s and wish for good luck.

 

 

[Guest basscheffers]

Not being an employee, I am not sure FBT would apply.

 

Division 7A is a weird one in this regard: (note: vehicles are regarded as property by the ATO)

 

The granting of a licence that does nothing more than provide a mere permission to enter onto and use real property, is not a transfer of property and hence not a payment for Division 7A purposes.

However, another example talks about the company paying for someone's fuel is.

 

So in my case, a payment of pure running cost but not share of the cost of purchase, hangar, etc. seems defensible as the vast majority is business use; my personal use is less than 10%.

 

Anyway, I am keeping track and will discuss this with my accountant when the time comes.

 

Whatever the outcome, it will be a whole lot less than paying $145/hour to rent it!

 

However, those having a non-aviation business buying a plane and using it for work once a year but for pleasure every weekend are probably in a world of hurt if they get audited!

 

 

[Guest Maj Millard]

Welcome back Orion, how are the legs Mate ?? The money I just recently put into purchasing my near new lightwing was partially plane money, as I sold (at a profit) my Drifter, which I had owned for eleven years. This gave me a good 20 grand deposit, and I went and borrowed the remaining thirty, to secure the deal. I financed through a specialized equipment finance company with a good reputation, but it ended up with ESANDA anyway. As with any large purchase, if you can purchase at below actual value as I have done, you probabily won't do too bad long term if you keep the aircraft in good shape.

 

I was in the right place at the right time, and knew the aircraft, so it was too good a deal to walk away from. I hate to borrow, but it was the only way this time.

 

My accountant has managed to put it into the business, and I do use it for business travel together with promotion, as I have put the company name on the tail.

 

He also considers fuel and hangar rental as business expenses.

 

As far as insurance goes, QBE gave me a good deal and continue to do so. I will support them as they have supported ULs for many years now, as they continue to do............................................

 

 

[Guest Orion]

Legs fine, but only just, Kokoda by far the toughest physical and mental challenge i have ever experienced.

 

As far as the point about "not an employee" goes.

 

This in fact reinforces my earlier point about taking advice.

 

A director of a company is by definition an employee whether or not they receive remuneration. That is law.

 

Thus most defineately any benefit received can be caught by FBT.

 

I won't even go near the Div 7A issue as it is another example of a little knowledge in an area being dangerous.

 

If the market hire rate is $145.00 per hour and you as an employee/ director and post 1/7/2009 a shareholder utilize for less than that then the dirrerence is subject to FBT or as a shareholder only Div 7A,

 

End of story