With the effects of the coronavirus pandemic being felt across just about every sector, many businesses have pretty much written-off their equipment investment plans, at least for the first half of 2020. Not surprising with the level of uncertainty many businesses were facing.
But as we hit the mid-year mark, positive signs emerged and on 9 June, a significant announcement which has many businesses revisiting their previously written-off asset investment plans. Specifically, the extension to the Instant Asset Write Off (IAWO) initiative to 31 December 2020.
- Under normal conditions and existing tax regulations, ie before COVID-19, businesses could write-off up the $30,000 on business equipment purchases in a financial year.
- In order to stimulate the economy through the purchase of business equipment assets, the Australian Government introduced the IAWO increase as part of the business stimulus package announced in March 2020.
- This measure allowed for eligible businesses with an annual turnover under $500m to write-off up to $150,000 on asset acquisitions. That is, the threshold was increased from $30,000 to $150,000.
- We covered the measure in our COVID-19 articles and you can read all the detail on the original fact sheet provided by the Australian government.
- But the deadline for business to take advantage of this benefit was to have acquired the asset and have the equipment operating in the business by 30 June 2020. That was only a 3 month window in the midst of an economic crisis for business to put their investment plans into action.
- A 3 month period when many businesses were forced to close due to lockdown restrictions or significantly reduced their operations due to the population effectively being ordered to ’stay home’.
- Unfortunately a missed business opportunity for many.
- As restrictions were eased, consumer confidence increased and businesses started reopening the Government revisited their raft of relief measures and rejigged some elements.
- The IAWO was one of those measures which was revised, with the change set to benefit up to 3.5 million businesses.
On 9 June 2020 the Federal Treasurer and the Minister for Employment fronted a joint press conference to announce that the deadline for IAWO measure was being extended from 30 June 2020 to 31 December 2020.
The extension means that businesses now have until 31 December 2020 to purchase equipment assets and have them operational in their businesses. The extension is designed to encourage businesses to stay with their investment plans to stimulate the economy and also realise a cash flow benefit through the tax deductions.
The additional 6 months has many businesses now reassessing their investment plans and putting those plans into action with the purchase of new equipment.
The IAWO covers a wide range business equipment – vehicles, trucks, machinery, fit-outs, fitness business equipment, medical equipment, mining equipment, construction industry equipment, catering and hospitality sector requirements and many more. Check the official ruling on the ATO or Treasury website or consult with your accountant to ensure your equipment is eligible.
The measure does cover both new and used equipment so you can still take advantage of great buys on the second hand equipment market. It does not appear to be limited to any specific purchase channel, so you may consider buying new or used from a dealer, a private seller or even at auction.
What to Keep in Mind….
As an extra encouragement to implement investment plans, the announcement came just in time for end of financial year special offers. Manufacturers and dealers in the new equipment market usually offer discounts to coincide with EOFY. These offers are usually only for a limited time, so it is still semi-urgent to get moving on sourcing the equipment you need.
Keep in mind that some large pieces of machinery equipment, especially in say the engineering and manufacturing sector, may take time for you to take delivery. There may be delays with shipments from overseas manufacturers that you should take into account as the IAWO requires the equipment be operational in a business by 31 December 2020.
Same applies to custom-made equipment and to equipment that may have a lengthy installation and commissioning period.
Also keep in mind that not all commercial equipment finance products will be suitable for IAWO. We strongly advise that you have the conversation with your accountant around how you should finance your equipment investment to realise the maximum benefit to your individual business.
Cheap Equipment Finance
With all those deadlines and considerations to take into account, you’ll be very pleased to know that Jade Equipment Finance takes the pressure off sourcing cheap equipment finance. No deadlines for our service or our cheap interest rate deals – they are always available.
Your Jade Equipment Finance consultant will provide a quote, structure the deal to suit your requirements and streamline the process to save you time. Should you need to act fast, just ask for our fast approvals service and if you’re heading to the auctions, we also offer pre-approved finance.
To discuss cheap equipment finance contact us on 1300 000 003 to speak with a Jade Equipment Finance consultant.
DISCLAIMER: THE INFORMATION PROVIDED IS FOR GENERAL CONSIDERATION. ANY REFERENCE TO OFFICIAL GOVERNMENT POLICIES HAS BEEN SOURCED FROM AUSTRALIAN GOVERNMENT AND STATE GOVERNMENT SOURCES. NO LIABILITY IS ACCEPTED FOR ANY ERRORS IN THE PRESENTATION OR INTERPRETATION OF THE FACTS AS PROVIDED BY THESE SOURCES. WE ADVISE ALL INDIVIDUALS AND BUSINESSES TO REFER TO THEIR ACCOUNTANT OR FINANCIAL ADVISOR FOR PROFESSIONAL ADVICE SPECIFIC TO THEIR INDIVIDUAL CIRCUMSTANCES.