The countdown to 30 June, EOFY – end of financial year, often means a frantic time for business owners. The final chance to maximise tax deductions and benefits prior to the close of the business accounts and preparation of the tax return. The greater the amount of allowable tax deductions, the lower the business taxable income and yes, less tax payable for that year. This financial year offers the additional benefit of TFE – temporary full expensing where the appropriate loan type for motor vehicle finance, truck loans or equipment finance is selected.
The investment in these assets can be facilitate a boost to the business in many aspects – increased efficiency, the opportunity to expand, realise productivity gains, the opportunity to implement the latest technology into the operation and of course, to post increased profits.
When assets are financed with cheap interest rate finance, those benefits can be further boosted. When the finance also facilitates the utilisation of the temporary full expensing tax measure, the benefits can be super-charged.
For the 2021/22 financial year, businesses that acquire assets that are eligible under the criteria, may opt-in for temporary full expensing. An accelerated asset acquisition measure which allows for the full purchase price of the cars, trucks or equipment to be deducted as an expense in the single year, the year of purchase. This compares extremely favourably to the standard depreciation schedule where assets are written-off to tax over multiple years in smaller portions.
Opting-in to temporary full expensing requires selecting the appropriate Motor Vehicle Finance, Truck Loans or Equipment Finance which allows for depreciation.
Temporary Full Expensing Criteria
Temporary full expensing has been implemented at this time, since 2020, as a measure to stimulate the economy through the expected economic downturn due to the impacts on business from the pandemic. The concept being to motivate businesses to purchase new motor vehicles, equipment, trucks and other machinery and in doing so attract a significant end-of-year tax benefit.
The economy benefits by the activity of such purchases and can boost employment. The business can realise productivity and profitability benefits at the time of purchase and at the end of the financial year face a lower tax bill – thus easing cash flow.
TFE, aka Instant Asset Write-off, has been in place for over two years and has been extremely popular with a wide take-up. The option made even more attractive with the low interest rate climate over this same timeframe.
While temporary full expensing is available through this and the coming 22/23 financial year, the benefit is realised in the year the assets were acquired. For businesses seeking to realise that benefit in 21/22, it’s time to get moving. The clock is ticking towards 30 June 2022.
Business operators can refer to the ATO website for eligibility criteria for businesses and for assets. It is also advisable for business owners to discuss with their accountant whether or not temporary full expensing will suit their accounting method and other aspects.
Under the criteria for eligible assets, business vehicles, plant, machinery and equipment and truck purchases may all be subject to temporary full expensing. In order for the goods to be considered a ‘depreciable asset’ the finance product must allow the goods to be depreciated.
Chattel Mortgage is considered well-suited to many businesses that wish to opt for temporary full expensing. It suits the cash accounting method which is widely-used by many Australian businesses and has a secured finance format.
This form of finance is available for the purchase of cars, other business vehicles, trucks and for many types of new business equipment. The lender essentially accepts the goods as the security against the loan and the ownership of the goods transfers to the business buyer/borrower.
The format allows for a balloon which can be used effectively to achieve a preferred repayment amount. A larger balloon results in smaller monthly repayments and smaller balloon a higher monthly repayment. Use our loan calculators to see how this works.
Lenders will have requirements around the balloon amounts approved based on their guidelines and the loan application. Your Jade Finance consultant will handle those negotiations on your behalf.
Another major attraction of businesses to Chattel Mortgage is the interest rate. While Chattel Mortgage attracts the lowest rate of the different types of business finance. The interest rate can vary across motor vehicles, trucks and for different industries and types of plant, machinery and equipment. Interest rates also vary according to the lender’s risk assessment of individual business loan applicants.
Taking all that into account, those considering a purchase with Chattel Mortgage finance can acquire repayment estimates using the interest rate comparison table or our loan calculators.
Secure Pre-EOFY and Rate-rise Finance
The RBA raised the cash rate in May and may well do so again at its 7 June meeting. If not in June, then possibly shortly thereafter. The RBA Board has indicated that additional rises will be required in order for inflation to be returned to its target levels.
Indications which place urgency on businesses to lock-in their finance as soon as possible to avoid paying more as a result of a rate rise. With our accreditations with 40+ lenders, Jade Finance is well-placed and has a track record for achieving better interest rates for business finance.
No hassles, no time-wasting and no delays on our part. Quick quotes, fast approvals and prompt settlement are integral to our service offering to ensure our customers meet their timeframe for asset acquisitions.
To make the most of the tax benefits of temporary full expensing and the current interest rates, speak with one of our consultants regarding your finance requirements.
Contact Jade Finance 1300 000 008 to source business finance prior to the end of the financial year
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.