May and June are very popular months for business owners and operators to get busy to ensure their pre-tax preparations are in place in time for the end of financial year. While EOFY strategies will depend on individual objectives, utilising the benefits of business finance to increase tax deductions is extremely popular.
We provide an overview of how a range of business finance products can assist businesses with tax benefits and to better position themselves for improved productivity and profitability in the new financial year.
One of the popular pre-tax time actions for businesses is to acquire new assets. Assets such as motor vehicles, trucks, plant, machinery and equipment. Currently there are tax measures in place which make the acquisition of new assets and extremely attractive option in regard to tax deductions.
The tax measures - temporary full expensing and IAWO are available for eligible assets acquired by eligible businesses. But in order to take advantage of these measures in this current financial year, the goods must be acquired and operating in that business by the end of financial year.
These measures allow for the full acquisition price of the eligible assets to be deducted as a tax deduction in the year of purchase. With some high-priced items that may represent a significant deduction which would reduce the tax payable. It may also put the business into a loss rather than a profit position for the year. That may in turn bring in the possibility of taking advantage of another current measure – Loss Carry Back. Utilising this measure may result in a cash tax return being received. Refer to your accountant to discuss the suitability of your business for these tax measures.
Refer to the ATO guidelines for the criteria for eligibility for both businesses and assets. Note that as confirmed in the Federal Budget 22/23, temporary full expensing is available through the next financial year, to 30 June 2023. The tax benefits available for assets acquired after 1 July would be realised in the 2022/23 financial year.
Asset Acquisition Finance
To finance the purchase of business assets, business have the choice of Leasing, Rent to Own, Commercial Hire Purchase and Chattel Mortgage. For those considering IAWO, Chattel Mortgage is considered the loan type most suited to that tax measure.
By acquiring eligible assets with Chattel Mortgage finance in this financial year, the full amount of the purchase price can be written-off to tax when the tax return is prepared.
All business finance products do include a tax deductible element. How much and when the tax deduction is realised varies across the product selection. The timing of the purchase and the finance can impact the timing of realising the benefit.
For example, in regard to GST, with Chattel Mortgage, the entire amount of GST payable on the purchase of assets can be claimed in the next BAS. Whereas with Leasing, the GST is added to the monthly lease payments and claimed in that way on the corresponding BAS returns.
Restructuring Finance Arrangements
It’s been a tough few years for many businesses with drought, COVID and floods for starters. Issues around supply chain delays and labour market pressures may continue to impact some businesses into 2023. Why not consider starting the new financial year in a better position with the assistance of business finance. This may be achieved by restructuring current loans through refinancing or by seeking finance to support investment in the business or to ease cash flow.
Consider these options which Jade Finance can assist you with sourcing:-
- Business Overdraft
- Secured and Unsecured Business Loans
These finance measures can be sourced and structured to specifically meet the financial goals of individual businesses.
Business Finance Interest Rates
In addition to the approach of the EOFY another very compelling motivation for businesses to review their current financial arrangements now is the interest rate situation. For quite some time the general lending market has been in a position to offer extremely low interest rates. In fact, the RBA has not raised the cash rate for over 12 years and in November 2020 the rate was cut to the current record low of 0.1%.
But that situation is about to change. The RBA is tipped to make their first move on rates in June or even possibly at its May Board meeting – yes, that’s next week! We say ‘first’ because many analysts expect the RBA to act several times in 2022 and in 2023. As to by how much each increase will be – we await the outcome of these meetings to know the figure.
When the RBA increases the cash rate, the lending market responds. Each bank and non-bank lender will follow their own individual guidelines in regard to lifting their interest rates in each of their lending markets.
So securing business finance as soon as possible could mean a significant saving in the loan repayments and on the total interest payable over the finance term. We confirm that despite the expected increase in rates, Jade Finance will, as always, continue to secure better rates and the cheapest rates achievable for our customers.
The clock is ticking towards 30 June, so act now and discuss your ideas and goals with one of our consultants to see how we can assist you meet your targets.
Contact Jade Finance 1300 000 008 for business finance solutions
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.