As we near the end of 2022, the year can definitely be described as once again, challenging for businesses and individuals. After the ‘pandemic years’ of 2020 and 2021, some relief from the pressure may have been expected as the economy recovered. But soaring inflation, supply chain issues, devastating floods and rate rises in many sectors including equipment finance have presented plenty of issues to deal with.
But despite the current situations facing many operators, particularly in regard to the floods in NSW, there are some important deadlines and information to be across. This update on equipment finance includes alerts around Director ID, expiring tax measures, interest rates and flood victim advice for businesses with loans.
End of November Cut-off for Director ID Number
A new regulation from ASIC has been reported as not being noted by many affected business owners and requires immediate attention. ASIC brought in a new ruling some time ago that all directors of companies, with some exclusions, need to have their own unique Director Identification Number – Director ID. There have been varying deadlines to acquire a number with the final deadline for those that have been directors of companies prior to 2018 now just a week away – 30 November.
The penalties for failure to comply with this ruling a significant – large fines and possible deregistration. Issues which could have serious impacts. Anyone who is a director of the company and has not yet acquired their Director ID are urged to get onto this asap.
The process is not difficult, it basically requires entering information at the ABRS website. You will need to have a MyGovID in order to complete the form. This is separate from having a login for the Government’s MyGov website.
We’ve posted a blog with handy tips to explain and make the process easy for our customers. You can access that article in our News and Tips section. Be mindful that the information required does relate to the individual director and not the actual company.
Temporary Full Expensing Ends 30 June 2023
The very attractive tax benefits that many operators have taken advantage of over the past 2+ years are due to come to an end at the end of this financial year. That is, the benefits associated with Instant Asset Write-off aka temporary full expensing (TFE).
This tax measure hit the headlines from April 2020 when introduced as a COVID stimulus measure but may have faded from consciousness recently with so many other business issues to deal with. For those with plans to upgrade or replace equipment or expand their fleet of machines, TFE may definitely be worth some close consideration before the deadline.
The tax benefit is significant as the full cost of the new machinery, plant or equipment that meets the criteria can be claimed as a tax deduction in the year of purchase. That can be quite a substantial amount which would in turn reduced taxable income and tax payable in the 2021/22 tax year.
The offer of this tax measure comes to an end on 30 June 2023. Yes, that is quite a few months away but keep in mind that stocks of many new machines and equipment continue to be disrupted by global supply chain issues. Operators may need to order now to ensure the equipment is received and operating in the business with finance finalised before the end of June deadline. The usual Christmas holiday shutdowns both here and overseas may cause further delays.
The type of equipment finance selected for purchases will impact the suitability for TFE. The equipment needs to a ‘depreciable asset’. That means it needs to be ‘owned’ by the business, as in, listed in the company’s balance sheet. That is particularly relevant to the equipment finance.
Chattel Mortgage Equipment Finance is best-suited for this purpose compared with Rent-to-Buy and Equipment Leasing. With the latter finance types the lender retains ownership of the equipment and as such it would not be considered a depreciable asset for the buyer.
In regard to interest rates, Chattel Mortgage is also very attractive finance option. Compared with other finance types, it typically has the lower interest rates. This is not only through Jade Equipment Finance but Chattel Mortgage or Equipment Loan, tends to have lower rates than Leasing across the lending market.
Flood Victim Information
Once again we’re seeing yet another area of the country devastated by floods. This time it is central west of NSW and authorities are warning more flooding even without further rain as the waters move downstream.
For operators that have lost machinery under finance in a flood event, it is important to contact the lender as well as the insurer. The equipment finance repayments will still need to be met even after the insurance claim is lodged. Failure to do so can have impacts on the credit profile and future finance prospects.
If machinery hasn’t been lost but work flow has, relief for equipment finance repayments may be sought through the lender. Banks are usually very accommodating under these disaster situations as previously demonstrated.
To replace machinery immediately, new finance applications can be made even before the insurance claim is settled. Our Jade Equipment Finance consultants can expedite applications and assist with liaising with the seller, to ensure swift replacement of essential gear and equipment.
Cash relief for businesses may be available through state and federal government emergency programs.
Equipment Finance Rates Update
As indicated by the RBA Governor and Deputy Governor in recent addresses, further rate rises are to be expected. Lenders vary in how they respond to RBA decisions, in both timing and the amount of the their own rate increases.
Despite the rising rate scenario, we continue to be in a position to secure cheaper equipment finance interest rates and very attractive terms and conditions for business finance products.
For cheaper machinery and equipment finance contact Jade Equipment Finance on 1300 000 003
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.
