As lenders for all types of equipment, heavy vehicles and other assets, Jade Equipment Finance stays across developments, news and policy in regard to business lending, equipment investment and asset acquisitions. Due to the economic impacts of COVID-19, we have maintained a constant watch on announcements of stimulus measures and other assistance provided at both federal and state government level. We have covered many of these measures in our articles so our customers can quickly access information on how the measures and policies interact and impact equipment finance.
Instant Asset Write-Off has been somewhat the lending story of 2020. Introduced in March as one of the first benefits for businesses and then the deadline was extended to allow more businesses to take advantage of what was on offer. Both buyers and sellers of equipment benefit. The buyers through the tax write-off and sellers in the increased sales the measure stimulated.
In the Federal Budget the IAWO measure was further extended and expanded with the addition of the temporary full expensing. These combine to allow even more businesses to take advantage of the tax benefit for the acquisition of a wider range of assets.
We’ve covered these topics in great detail in a number of articles, but recently an issue has come to our attention which requires an update. The issue being that the addition of safety enhancements and equipment (subject to eligibility criteria) to existing heavy vehicles appears to be eligible for the IAWO and temporary full expensing measures.
Safety Enhancements Eligible for IAWO
In a speech to the Heavy Vehicle Industry Association, the Hon Scott Buchholz MP, who is the Assistant Minister for Road Safety and Freight Transport clarified the position in regard to safety enhancements. He stated that if operators upgraded existing trailers with safety enhancements, those enhancements would be covered and eligible under the IAWO and temporary full expensing criteria. (While we trust this source, we do advise checking criteria and eligibility for your business and the particular equipment with your accountant.)
This would mean that the cost of the enhancements could be fully depreciated and deducted as a taxable expense in this current financial year, subject to the eligibility criteria. Our source reports that improvements and upgrades not just the acquisition of an asset are included. As with most tax policies, there are exclusions and criteria, but this could be worth you considering.
In reporting on the Assistant Minister’s speech, the HVIA related several examples produced by the ATO as to scenarios of where the acquisition of safety enhancements and improvements to existing assets would be eligible for IAWO and full expensing. If interested, check the www.ato.gov.au website for these and other examples or speak with your accountant.
Finance for Equipment Acquisitions
Such safety enhancements as referred to in this speech and HVIA discussion, may represent a significant equipment acquisition for your business and as such require cost-effective finance solutions.
Jade Equipment Finance specialises in tailored finance solutions for the acquisition of a wide range of equipment and assets for all types of businesses. We are ideally placed to source cheap equipment finance interest rates regardless of business set-up, for large companies, family businesses, sole traders, partnerships and SMEs. Through our accreditation with several key non-bank lenders that operate solely in the equipment finance sector, we have access to lenders that are flexible and negotiable when it comes to structuring equipment loans.
While we offer the full range of commercial finance facilities, for eligible businesses seeking to realise the benefits of IAWO or temporary full expensing with the equipment acquisitions, Chattel Mortgage is the most suitable loan type for this purpose.
Chattel Mortgage Suitable for IAWO
For those not as familiar with Chattel Mortgage as with other loan types such as Leasing and Rent to Own, it is a very straightforward type of finance. Many banks have now dropped the (to some people) unusual title and refer to this type of finance simple as Equipment Loan.
- The borrower takes ownership of the equipment while the lender uses the equipment (chattel) as security against the loan (mortgage).
- The borrower repays the loan in equal monthly repayments over the fixed loan term. A balloon is optional.
- As the borrower has ownership the equipment appears on their balance sheet and as such is depreciated in accordance with the ATO guidelines of the day.
- Currently those tax rulings allow eligible businesses to full deduct the purchase price of eligible equipment in the year of purchase that is the current financial year if purchased post Federal Budget. All subject to IAWO and full expensing criteria.
- As the deduction is realised through depreciation, the repayments are not full tax deductible only the interest is deductible.
- The full GST payable on the equipment can be claimed in the next BAS return.
Your Jade consultant will consult with you in regard to your financial objectives and source a quote on a Chattel Mortgage for your equipment purchase.
For further information on taxation policy and current benefits for business, refer to ATO and keep checking in with our articles as our team continue to update on new policy measures.
For a quote on a cost-effective loan for your equipment purchase, contact Jade Equipment Finance on 1300 000 003
DISCLAIMER: READERS ARE ADVISED THAT THIS INFORMATION AS PRESENTED IN THIS ARTICLE IS INTENDED FOR GENERAL INFORMATION PURPOSES AND NOT AS FINANCIAL ADVICE. PEOPLE NEEDING FINANCIAL ADVICE ARE RECOMMENDED TO CONSULT WITH A FINANCIAL ADVISOR TO ASSIST IN REGARD TO THEIR INDIVIDUAL CIRCUMSTANCES. INFORMATION AND CONTENT IN THIS ARTICLE MAY HAVE BEEN SOURCED FROM A RANGE OF PUBLICATIONS AND INFORMATION RESOURCES. NO LIABILITY IS ACCEPTED FOR ANY ERRORS, OR MISINTERPRETATION OF OTHER ISSUES AROUND THE PRESENTATION.
