Josh Frydenberg, Federal Treasurer, delivered the Government’s Federal Budget for 2022/23 on the evening of Tuesday 29 March with some significant benefits on offer for businesses. With pressure increasing in regard to costs of living and especially with record fuel prices a major concern, many were eyeing the Budget to deliver at least some level of immediate relief to cash flow and back pockets. As lenders, our keen interest is on what effect Budget measures will have on equipment finance and especially how our customers will benefit and grow through the initiatives offered.
On reviewing the Budget announcement we see there are a number of key measures in the Budget which present work opportunities and tax benefits for machinery investments with the right equipment finance. Interest rates are also a hot topic right now and while the cash rate is set by the RBA and not the Federal Government, the outcomes of Budget measures are major influences on the economic conditions relevant to rate moves.
We present the key take outs from the Budget announcement with particular focus on the measures which represent opportunities for business operators to benefit from machinery and equipment asset investments.
In delivering his Budget Speech, Josh Frydenberg opened with comments around the challenging period which currently exists both globally and locally. Mentions included the Ukraine invasion, the pandemic which is continuing and especially the disastrous flood situation.
Mr Frydenberg noted how difficult the past few years had been but how resilient Australia and Australians had been in recovering from the effects of the pandemic. The recovery in Australia being faster and was stronger than nations such as Japan, Germany, United States, United Kingdom and Canada.
Unemployment levels have dropped to those equal with the lowest recorded over the recent 48 years, being now at 4%. The Treasurer stated that unemployment would decrease further with this Budget as it would deliver more jobs and would result in wages growth.
Mr Frydenberg said that with low levels of unemployment now achieved, the emergency support measure phase had passed. The focus of the Government now was on the next phase of its fiscal and economy strategy for recovery.
Significant Budget Measures
The ‘biggie’ that all Australians had been waiting for over the past few weeks was finally released – relief at the petrol bowser. Rocketing fuel prices have been crushing for many businesses as well as households. The rising costs flowing through supply chains. The Government has responded with a temporary cut in the 44c per litre fuel excise to 22c per litre for 6 months. Unlike some budget measures which must go through the passing of the Budget Bill, this cut came into effect from Budget night.
Reductions are now being seen at the petrol bowser and will continue to be seen as petrol stations finish stock that was purchased pre-announcement. Not budget related but worth mentioning, global oil prices are also starting to fall so there should be further reductions in petrol prices in coming weeks.
For those planning on new equipment acquisition in the coming year, the good news is that the Instant Asset Write-Off will continue through to 30 June 2023. This initiative was introduced as a stimulus measure and presents significant tax benefits to eligible businesses for the purchase of eligible assets. Check criteria with ATO guidelines.
IAWO allows the full cost of the equipment to be deducted as a tax deduction in the same year it was acquired. But the right finance product, Chattel Mortgage, needs to be used for the acquisition.
Small businesses also get a tax cut in the Budget. A reduction to 25% from the current 30% company tax rate.
Additional tax breaks can also be realised through investments in new digital technologies. $120 tax deduction for every $100 spent. Jade Equipment Finance can assist businesses to acquire these technologies which may include e-invoicing, cloud computing, cyber security systems and even websites. Our finance products can be used for the purchase of both hardware and software either through our asset purchase finance or through Secured or Unsecured Business Loans.
For individuals that earn $126,000 or less that is what is considered as low to middle income earners, the LMITO is increased by $420. This represents a maximum now of $1500 for some taxpayers. This is received as a tax refund after the annual return is submitted and assessed.
Business spending on upskilling and training also attracts and additional tax break. To assist with implementing training programs, speak with us about finance by way of Business Loans or Business Overdrafts.
New Work Opportunities
The prospects to grow many businesses are offered through the Budget’s investment in infrastructure projects and the Modern Manufacturing Strategy. To review industry or region specific projects, review the Budget detail.
Equipment Finance Outcomes
From an interest rate on equipment finance perspective, the falling unemployment rate is a key determinant for the RBA to increase the cash rate. If this continues to fall while inflation rises, we could see the RBA move on rates several times in future months.
The outcome bottom line for astute operators is to move quickly with the current low interest rate scenario to achieve the cheapest equipment finance to fund equipment, plant and machinery purchases.
Contact Jade Equipment Finance on 1300 000 003 for cheap equipment finance.
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.