There is certainly a lot going on, both in Australia and on the international scene, which businesses need to take into account when making key acquisition decisions. But one key even which usually has all Australian businesses stand up and take notice in unison is the annual Federal Budget. The time for the 2021/22 budget announcement is fast approaching and time for us to reflect and project what our team at Jade Equipment Finance would like to bring to the attention of our customers.
The date to note is Tuesday 11 May, which is when Treasurer Josh Frydenberg will officially hand down the budget in Parliament. But there are the usual pre-budget announcements that should start flowing during the last weeks of April. But April is proving a problematic time for the Government with the vaccine rollout timeline having to be recalibrated. No doubt also causing recalibrations or at least some rethinking in regard to the proposed budget. Click to read more.
When the delayed 20/21 budget was brought down in October, it was heralded as the most significant in at least a very long time, if ever in the nation’s history. But on reflection, the 21/22 could in many ways be even more significant. Rewind to October and we had passed and overcome what was then seen as the major impact of the pandemic. Despite Victoria still being in the final stages of the second lockdown the economy was seen to be in the recovery stage, a vaccine was a reality, though international travel, both inbound and outbound, was still not on the cards.
But since those heady days of the October budget, extension of JobKeeper and JobSeeker and stimulus measures, a lot has happened. Outbreaks of the virus continue to occur, snap lockdowns have been brought in on a number of occasions and now we have setbacks with the vaccine. Key sectors are calling, loudly, for targeted support packages, JobKeeper has finished which is due to cause a bump (in the Treasurer words) in the unemployment figures and the costs of recent natural disasters including flooding on the north coast of NSW and Cyclone Seroja in WA are yet to be assessed. So it will be interesting to see what measures are introduced on 11 May.
But it’s not all doom and gloom for everyone. The economy is doing better than expected overall, interest rates are still at historic lows and there are still measures from the 2020/21 budget to be released.
While we await those pre-budget announcements, it’s worth recapping on what is still available to be realised by business in regard to tax benefits from equipment purchases.
2020/21 Budget Initiatives
Many of the measures introduced by the Government both early in the pandemic and in the 2020/21 Budget in regard to accelerated asset depreciation and other business tax relief are still available. Several of these measures are particularly relevant to our Jade customers and worth a reminder at this time.
Temporary full expensing, which is an extension and expansion essentially of the Instant Asset Write-Off initiative, is current through the 21/22 financial year for eligible businesses. IAWO has been promoted and covered extensively over the past 12 months and for good reason. Eligible businesses that acquire eligible equipment assets using the relevant finance product stand to realise significant tax benefits.
The relevant finance product is Equipment Chattel Mortgage as this loan product allows the equipment to be depreciated. The key purpose of accelerated asset depreciation measures. If you intended to utilise these measures but are still to action those acquisition plans, now may be timely to revived the plans and give us a call to discuss a cost-effective finance package.
But one measure in the budget not as widely and continuously mentioned is Loss Carry Back. So we’re going to give it due mention now.
Reminder - Loss Carry Back
Under the usual tax rulings, if a business makes a loss in a financial year, it simply carries those losses forward into the next financial year and can claim against profits made in the next or future years. So no real benefit is received initially.
With Loss Carry Back, a real cash benefit can be received. Loss Carry Back is a tax measure whereby eligible businesses can claim losses made in 19/20, 20/21, 21/22 against profits made in earlier years. So if you made a profit in the years designated under the ruling and paid tax, and then you made a loss in the designated years, you can claim the current loss against past profit and receive a cash refund on tax already paid. Yes, a cash refund after submitting this year’s return!
The significance of loss carry back to us as equipment lenders is linked back to IAWO. Both measures can work together to deliver increased positive outcomes. Acquire equipment with a Chattel Mortgage, realise the IAWO, if that results in the business posting a loss, that loss can be claimed against profit and tax paid in earlier years.
So there are benefits to be realised, by eligible business for eligible equipment purchases. We offer our cheapest equipment loan interest rates on Chattel Mortgage which can mean cost-effective equipment acquisition and additional tax benefits.
So as we await the Treasurer’s announcements, don’t overlook the measures which are still available from the last budget.
Contact 1300 000 003 to discuss lending for your equipment purchase.
DISCLAIMER: IF MISINTERPRETATIONS, MISREPRESENTATION OR ERRORS EXIST IN THIS ARTICLE, NO LIABILITY IS ACCEPTED. THE INFORMATION IS PROVIDED ONLY FOR GENERAL PURPOSES AND NOT IN ANY MANNER INTENDED AS THE ONLY SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADDITIONAL GUIDANCE OR ADVICE SHOULD REFER TO AN INDEPENDENT FINANCIAL ADVISOR.