WANT TO GET THE TAX MAN TO HELP YOU BUY BUSINESS EQUIPMENT
Now is a great time to purchase a work vehicle or equipment for your business. The Federal Government passed legislation last year to extend and increase the instant asset tax write-off for small businesses. That means if your business is eligible, you could potentially make several purchases up to $30,000 each this financial year, then claim the expenses back on your next tax return – and get the tax-man to help you pay for it!
Here are some popular business equipment finance options to give you a general idea of how we can help.
Finance Lease
The great thing about leasing is that you can access the latest equipment and vehicles with no capital outlay. The lender retains ownership of the asset and you lease it back from them at a fixed monthly payment. Once the lease is up, you can choose to pay a ‘residual payment’ and buy the asset, then potentially trade it in and upgrade to a newer version. Another option is to refinance the residual and continue leasing.
Advantages:
• You’ll know what your payments are and can manage your cash flow accordingly.
• You may be able to claim the lease payments as a tax deduction (speak to your accountant).
• There could be other tax benefits, including potentially making advance lease payments for tax or cash flow purposes (again, it’s best to consult your accountant).
• You may be entitled to claim a GST credit for the GST included in each lease payment.
• There’s flexibility to reduce the size of your payments by increasing the residual amount at the end.
• You can keep your assets up-to-date and some equipment leases can potentially include a service contract.
In addition to finance leases, there are also operating lease agreements. This is when you don’t take on the obligation to pay the residual value at the end. The asset is simply handed back to the lender.
Hire purchase
Again, a hire purchase allows you to obtain the latest equipment and vehicles for your business, whilst preserving your cash flow. With this finance option, the lender purchases the equipment or vehicles you require, then hires it to your business for a specific period. It’s like a finance lease, but when the final payment is paid, your business immediately owns the asset.
Advantages:
• Won’t tie up your cash
• Generally, doesn’t require additional security
• Depreciation and interest on any lease repayments may be tax deductable (check with your accountant)
• You own it at the end of the hire period
Chattel Mortgage
A chattel mortgage is another type of finance option that works well for businesses. The financier secures the loan using the “chattel”, or the vehicle or equipment you purchase. You take ownership of the asset, and the mortgage is registered with ASIC. Once the loan is paid off, the mortgage is removed, and the vehicle or equipment is officially yours.
Advantages:
• If you’re registered for GST on a cash basis, you may be able to claim the GST in your vehicle’s price up-front through your next Business Activity Statement (BAS), (check with your accountant).
• GST is not payable on your repayments
• You may be able to claim depreciation and the interest charges on your chattel mortgage as a tax deduction (again, consult your accountant)
• Lower interest rates generally apply as finance is secured against the asset
• You may be able to decrease your regular repayments by paying a deposit upfront, trading-in a vehicle, or opting for a balloon payment at the end of your loan term
• You can manage your business cash flow more effectively
Loans and other finance options
In addition to these popular ways to finance vehicles, machinery and equipment for your business, we can also offer a wide variety of business loans – both secured and unsecured. These can be used for anything from equipment purchases to inventory control and cash flow management.
For an honest and unbiased opinion or to discuss your requirements with an industry expert, talk to Think and Grow Finance today on 03 8390 5855 or email mitesh@thinkandgrowfinance.com.au