Depending on your industry sector, there’s been a lot happening across the Australian economic and business landscape. From recovery from the COVID limitations and lockdowns, to coping with the east coast floods, to navigating the challenges of the supply chain of goods and materials, to balancing budgets with surging costs, to coming to terms with how a change of Federal Government may impact your business prospects. But it is now time to refocus very quickly and move on pre-EOFY acquisitions and apply for equipment finance, truck loans or motor vehicle finance.
The 30 June deadline looms and in this financial year, that means lucrative tax deductions are available for eligible business on eligible asset purchases. But to claim the tax deductions in 21/22, the assets must be operational in the business prior to the 30 June deadline.
While stressing the urgency of the timeframe, we offer relief in that our Jade Finance consultants can move instantly to secure finance quotes and approvals for businesses quickly and at better interest rates. The need to move quickly does not mean a higher rate would apply for the finance.
But in order to realise the tax benefits available on certain acquisitions, the choice motor vehicle, truck or equipment finance product can be a critical decision. So the decision around which loan type to select needs to be considered in the context of the business operation and advisably, in consultation with the accountant or financial advisor.
The pressure is on to move on these acquisitions if the benefits of temporary full expensing and Instant Asset Write-off are to be realised in the 21/22 financial year. Another reason to move rather than delay until next financial year is the strong probability of further rate rises. It is quite likely that the when the RBA Board meets on Tuesday 5 July it will make another upward change to the cash rate. An increase which will be seen in increases in the rates offered by our banks and non-bank lenders. That higher interest rate can result in higher monthly repayments and eke away at the tax and other benefits realised through the purchase.
Tax Benefits Available on Asset Acquisition Finance
Business finance incorporates tax deductions in one form or another. These vary across the different loan types with variations in which items are deductible and when a deduction is made. Specifics around the business and the asset may also impact deductibility. They are issues which need to be addressed by the accountant or by referring to ATO guidelines.
For the purchase of motor vehicles, trucks and equipment, we offer a complete portfolio of loans:- Chattel Mortgage, Commercial Hire Purchase and Leasing for business vehicles, trucks and equipment as well as Rent to Own for truck and equipment purchases.
Which loan type is suited to a particular business will be based on the method of accounting which the business uses; the approach the business takes to their balance sheet with posting the value of assets and liabilities; and the general objectives for the business to be reached through asset investments.
In regard to the finance side of the acquisition, the objectives will typically include maximising taxation benefits, improving productivity, meeting cash flow and budget targets and increasing profitability. Objectives which can be targeted through cheaper interest rate finance.
In this current financial year, the benefits available through temporary full expensing and IAWO can be realised on eligible asset purchases by eligible businesses. Refer to ATO guidelines on criteria. By using Chattel Mortgage to finance the acquisition, eligible businesses can deduct the full price of the goods in the 21/22 financial year. Under normal tax rulings, the purchase price would be depreciated according to the tax schedules, over several years in smaller amounts.
These temporary measures may represent a huge benefit to many businesses by reducing their income which is subject to tax and as such, receiving a lower tax obligation for the year. In addition, the opportunity presents to consider Loss Carry Back. This can deliver a tax refund to the business.
Where Chattel Mortgage is not considered as suited to the business set-up, the other finance products offer significant tax deductions also, but over a longer time period. With Leasing and Rent to Own, the monthly lease payments are treated as a fully deductible business expense.
Interest payable on all finance products is also fully deductible.
With the finance product selected and the assets sourced, it is time to arrange the finance. As a broker-style set-up, we are structured to respond immediately to customer requests with quick quotes and fast approvals. Our system is streamlined to save customers time and hassle in securing cheaper interest rate finance.
So to avoid missing out on tax benefits this financial year and to avoid a possible July rate hike, apply over the phone or online today. Pre-approved finance is available if you are yet to source the vehicles, trucks or equipment you require.
Contact Jade Finance 1300 000 008 for quick action on pre-tax business asset finance.
DISCLAIMER: NO LIABILITY IS ACCEPTED IF ERRORS OR MISREPRESENTATIONS ARE FOUND IN THIS ARTICLE. THE ARTICLE IS PREPARED AND PRESENTED FOR GENERAL INFORMATIVE PURPOSES AND IS NOT INTENDED TO BE THE SOLE SOURCE OF INFORMATION FOR MAKING FINANCIAL DECISIONS. THOSE REQUIRING GUIDANCE AND ADVICE SHOULD CONSULT A FINANCIAL ADVISOR.