TFE? That’s temporary full expensing aka IAWO or Instant Asset Write-off. A very generous taxation measure which is currently available for the purchase of eligible assets by eligible businesses. Why Chattel Mortgage? Chattel Mortgage is seen as the most appropriate form of finance for cars, trucks and equipment to realise the benefits of temporary full expensing.
Why are we bringing this up now? Because the current availability timeframe for businesses to take advantage of temporary full expensing expires on the 30th June 2023. In order to be eligible, the acquired assets must be operating in the business by that deadline date.
That’s ages away, why talk about it now? There are a number of reasons why businesses should revisit temporary full expensing as a potential cost saver for their operation. Reasons which we will also revisit as we provide this rewind-fast-forward article on Chattel Mortgage and how it can facilitate the benefits of temporary full expensing. Also highlighting how achieving cheaper interest rate Chattel Mortgage through Jade Finance for cars, trucks and equipment purchase can enhance outcomes of temporary full expensing.
Overview: Temporary Full Expensing
Many will be more familiar with Instant Asset Write-off than temporary full expensing. Apart from providing for the catchy IAWO, it probably more easily describes the concept of accelerated asset depreciation. Essentially IAWO and temporary full expensing are both accelerated asset depreciation measures.
These measures allow businesses to write-off or depreciate the full value/purchase price of new depreciable assets in the same year that they were acquired. Under the normal tax rulings, depreciable assets have to written-down or depreciated incrementally over a set number of years, as per the ATO depreciation schedule.
The increase in the amount to be written off in that first year can be significant, depending on the cost of the asset. Depreciable assets may include cars, motor vehicles, trucks, business equipment, plant and machinery.
These measures are introduced by government, under regulation by the ATO to address specific economic conditions. At the outset of the COVID-19 situation in early 2020, IAWO was included in the business stimulus package. The objective being to incentivise business owners to purchase new vehicles, trucks and equipment and thus, stimulate the economy.
As the pandemic rolled on, the Government tweaked the criteria of IAWO and it became known as temporary full expensing. In the October 2021 Budget, the timeframe was extended to 30 June 2023. In order to be able to utilise this benefit, businesses and the assets must meet the criteria.
Why Now Could be the Time to Act
As many operators will know, as the countdown to end of financial year gets underway in late April through, there can be a big rush to purchase motor vehicles and equipment before 30 June. EOFY clearances and sales are a good reminder.
But the current supply situation in many markets, especially motor vehicles, should be a reason to move those EOFY purchases forward. The supply issues are still not resolved, with the FCAI stating recently it could be well into 2023 before motor vehicle markets are stabilised. Wait and buyers may miss out.
Another important reason is interest rates. As most will be well aware, the RBA has made 5 significant increases to the cash rate in the last 5 months with another due on the first Tuesday in October. At this stage, it really is not known when the RBA will pause this rate-rise cycle as global factors and how inflation in Australia is tracking is uncertain.
Acting now and securing Chattel Mortgage finance to utilise temporary full expensing could prove an astute move.
Chattel Mortgage Relevance
That’s the perfect segue to why Chattel Mortgage is relevant to these particular tax measures. With Chattel Mortgage finance the business buyer immediately accepts the ownership of the vehicle, truck or equipment and repays the finance in monthly payments. In so doing, the asset becomes an asset/liability on their books and as such is a depreciable asset. As a depreciable asset, when meeting the ATO criteria, it may be subject to temporary full expensing.
This is a different finance product to Asset Lease where the lender has the ownership and the business makes tax deductible lease payments.
Chattel Mortgage is a very versatile form of business finance which is used to finance the purchase of a wide range of business assets. The lender accepts the assets as security against the finance. Jade Finance streamlines the process of securing Chattel Mortgage finance by handling the sourcing, quoting, negotiating, loan structuring and settlement stages.
We offer a fixed interest rate and fixed finance terms to provide certainty for business operators that the finance repayments will remain constant and unchanged over the term. Another reason that makes Chattel Mortgage a very popular choice is the interest rate which typically comes in lower than for Leasing.
A busy period is on approach for many operators with the festive season while others may be opting to embark on those COVID-delayed travel and holiday plans. Addressing asset acquisition plans with a view to temporary full expensing before this time may be a good plan.
Contact Jade Finance 1300 000 008 to discuss Chattel Mortgage for cars, equipment and trucks to take advantage of temporary full expensing.
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.