In addition, for those vehicles with CO2 emissions exceeding 130 g/km there is a flat rate disallowance of 15% of the productive rental in accordance with the guidelines governing the lease rental restriction. The lessor retains ownership of the asset but the lessee gets exclusive use of the asset (delivering it observes the terms of the lease).
A finance lease on other hand will have much more adminstration requirements and, based on the kind of asset and the ATO guidelines for the specific balloon, will have some further resale threat for the lessee as you must ensure the balloon amount is reached at the finish of the term.
The lease rental will be tax deductible to the extent of the company use and if a motor automobile, whether or not the cost cost exceeds the Luxury Automobile Value Limit ($57,180 in 2008/2009). But out of idle curiosity I picked a van at random and looked at various lease deals.
Accounting treatment: A finance lease is accounted for on the balance sheet as an asset and liability. Since there is no obtain alternative, the vehicle is constantly owned by the lessor. Such refund will be liable to income tax as it constitutes a recoupment for tax purposes, and is topic to VAT.