Income Tax Act 2007 section 998A

Meaning of "hire-purchase agreement"

Section 998A defines what constitutes a "hire-purchase agreement" for the purposes of those parts of the Income Tax Acts that reference this section, by setting out three conditions that must all be met.

• A hire-purchase agreement must involve goods rented out in return for regular periodic payments from the person receiving them (Condition A).
• Ownership of the goods must pass to the renter once the agreement's terms are met and a specified event occurs, such as the exercise of a purchase option (Condition B).
• The agreement must not be a conditional sale agreement, where part or all of the price is paid in instalments and ownership stays with the seller until certain conditions are fulfilled (Condition C).
• The distinction between a hire-purchase agreement and a conditional sale agreement is important: in a conditional sale, the buyer commits to purchasing from the outset, whereas in hire-purchase, ownership only transfers upon the occurrence of a specified event such as exercising an option to buy.