Are Low Docs Loans eligible for IAWO and BBI?

Most businesses in Australia have been impacted in one way or another by the COVID-19 pandemic to varying degrees. Some have experienced a much-appreciated increase in business activity due to changes in consumer behaviours, pivoting to new markets and grasping emerging opportunities in different sectors. Others have experienced and continue to work through the negative effects that the pandemic is having on their individual operation.

Despite the level of impact being experienced, most operators are keen to take full advantage of the Government stimulus and support measures available and suited to their business. Some of the supports rolled out have been in cash or grant form while others are in the form of tax benefits and benefits realised from investment.

The purpose of providing incentives for businesses to invest is to realise a benefit across the wider economy. Boosting investment boosts spending.

Two of the key investment incentive schemes which are relevant to equipment acquisition are the IAWO (Instant Asset Write-Off) and BBI (Business Backed Investment). Both these schemes were rolled out by the Federal Government and are subject to regulation by the ATO.

However, in order to realise the benefits of these measures, businesses must first spend. They need to acquire new assets/equipment in order to realise the tax advantages. Acquiring new equipment usually means accessing a workable and cheap finance deal. In any business environment that can be a challenging prospect for some operators. In a pandemic and the current economic conditions it may be even more difficult.

Businesses may need to first meet the criteria for Low Docs Equipment Finance and acquire their equipment to then be in a position to appreciate the benefits of IAWO and BBI. So it wouldn’t come as a surprise that Jade Equipment Finance would field enquiries regarding if equipment acquired with a Low Docs Loans is eligible for IAWO and BBI.

Which comes first – the low docs equipment loan application or the investment incentive eligibility?

With Jade Equipment Finance you can actually cover off on both stages concurrently. Your Jade consultant can commence the process for sourcing you loan options on a pre-approved basis while you investigate the eligibility under the schemes. There is no obligation in requesting a quote but having your finance approved before you start discussing a specific purchase can be highly beneficial.

Meeting the Criteria

Jade Equipment Finance provides pathways to Low Docs Finance for the purchase of equipment. However, it is the role of the business or their accountant to advise the business on the eligibility of both the business and the equipment to meet the criteria of any Government programs and schemes.

The criteria for IAWO includes:-

The criteria for BBI includes:

Low Docs Equipment Finance Requirements

For businesses that do not meet the criteria for a standard equipment loan, Jade Equipment Finance may be able to assist with a Low Docs Equipment Loan. We have accreditation with many non-bank lenders which are more flexible with loan terms and extend this specialised form of finance to applicants that meet certain criteria.

Criteria for a low docs, no docs or ABN-only equipment loan include:-

  • Holding a current ABN and having full identification is essential.
  • Being registered for GST is preferable with current BAS returns.
  • Providing some form of financial accounts, even simply prepared by the business owner.
  • If a new start-up and/or depending on the amount and quality of financial documentation provided, the lender may request additional security, place specific conditions on a loan and/or have maximum limits in regard to loan terms and loan amounts.

In order for a Low Docs Equipment Loan to be eligible for IAWO, it must be a Chattel Mortgage. With this form of finance the asset is entered on the borrower’s balance sheet and as such can be depreciated. With Leasing and Rent to Own this is not the case. The equipment is entered as an asset on the lender’s balance sheet.

Steps to Proceed

If you would like to proceed with applying for a low docs loan to acquire equipment to be depreciated under the IAWO or BBI, the recommended steps may be:-

  • Check the ATO requirements that both your business and the equipment meet the criteria.
  • Have an initial conversation with a Jade Equipment Finance consultant about sourcing you a quote for a Chattel Mortgage low docs loan.
  • Consult with your accountant in regard to whether this is the best option for your business or if an alternative, such as Low Docs Leasing or Low Docs Rent to Own as finance products may deliver more positive outcomes for your business.

The deadline for IAWO is fast approaching, so if you would like to take advantage of this scheme, you may need to get moving!

To discuss your options in regard to low docs equipment finance, contact Jade Equipment Finance on 1300 000 003

DISCLAIMER: ALL INFORMATION WHICH IS PRESENTED IN THIS ARTICLE IS INTENDED SOLELY FOR THE PURPOSE OF PROVIDING GENERAL INFORMATION. IT IS NOT UNDER ANY CIRCUMSTANCES INTENDED AS PROVIDING FINANCIAL ADVICE. FOR SPECIFIC FINANCIAL ADVICE ON INDIVIDUAL FINANCIAL CIRCUMSTANCES, READERS ARE ADVISED TO CONSULT WITH A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR INCORRECT OR OUT OF DATE DETAILS IN REGARD TO GOODS, SERVICES, POLICIES AND PROGRAMS MENTIONED IN THE ARTICLE. THE INFORMATION AND DATA QUOTED HAS BEEN SOURCED FROM PUBLICLY AVAILABLE SOURCES INCLUDING MANUFACTURER AND GOVERNMENT WEBSITES.