While it may only be relatively early in the current financial year, astute business operators planning to acquire new vehicles will have a keen eye on the end of financial year. Why? The end of June 2023 signals the end of the current temporary full expensing tax measures. Vehicles acquired to take advantage of this measure, need to be operational in a business by that date. Chattel Mortgage Car Finance is considered the most appropriate form of finance for accelerated asset depreciation measures.
Still doesn’t address your query as to why now? There are a number of reasons why businesses may benefit from fast-forwarding plans for new vehicles with Chattel Mortgage car finance to take advantage of temporary full expensing. We provide this reasoning as well as backgrounding the current tax measures to remind business owners of what is on offer.
Background: Temporary Tax Measures re Asset Purchases
Instant Asset Write-off (IAWO) hit the headlines in April 2020 when the Treasurer at the time, Josh Frydenberg, announced it as part of a larger package of stimulus measures to support the economy in the early stages of the COVID-19 pandemic. Many picked up on the benefits on offer to businesses with banks, lenders, motor vehicle dealers and others promoting the measure to attract advise buyers. We covered IAWO in detail in numerous articles over that time.
For a number of reasons including the first, very tight timeframe, the measure was adjusted and expanded in scope and in timing and by November 2020 it was known as temporary full expensing. Not as catchy a name possibly with its more technical nature, but still the same accelerated asset depreciation measure.
The ATO regulates temporary full expensing and those interested can refer to the criteria at the ATO website. The measure allows for the entire price of new cars and other work vehicles that meet the criteria, to be written off on the books through depreciation in the year the assets were bought. This contrasts extremely favourably with the usual depreciation schedule where only a small proportion of the value can be written off each year over multiple years.
As per the November 2021 Federal Budget, temporary full expensing is in effect until June 30, 2023.
Why Fast-forward Could be Advisable
So businesses have around 9 months to get those cars purchased in order to take advantage of this current tax measure. So why act now? Why not wait until say April or May next year and purchase the vehicles then?
One of the most compelling reasons is the current disruption to the supply chain which has seriously impacted the new motor vehicle market. There are long delivery times for many makes and models including some of the most popular work vehicles and utes. Tony Weber of the FCAI recently noted in a statement that supply may not stabilise until mid-2023. Buyers that decide to wait to place an order or make a purchase may discover that when that time comes, they cannot source the vehicle of choice.
New vehicle prices are on the rise which should also be considered. Delaying a purchase may mean paying a lot more than for current stock.
Another incentive could be in regard to scheduling. The festive and holiday period from October through to February can mean busier times for many businesses. With consumers hitting the ‘buy button’ after extended lockdowns, demand is strong for many goods. Consumers are also out and about which means busier times for operators.
Busy times ahead to deal with while many are trying to cope with labour shortages. Issues which will put more time pressures on owners. Matters such as buying new vehicles are likely to take a backseat under such circumstances.
Those facing a quieter time during this period may have holiday plans of their own, with business matters deferred to the new year.
And then there is the matter of interest rate rises. The RBA has already said that more rises would be required. Securing finance while rates are at current levels may represent a savings on the interest total and of course the monthly payment commitment.
Chattel Mortgage Car Finance
Sole traders for car finances is suited to accelerated asset depreciation measures as this form of finance allows for the assets, in this case motor vehicles, to be depreciated. This is possible as the business takes the ownership of the motor vehicles at the time the finance is settled. The vehicles are entered into the business accounts and become depreciable assets.
To illustrate a difference, with a business car leasing the lender holds the ownership. The business makes the lease payments which are the major tax deduction.
By depreciating the full amount of the car price in the same year the vehicle was purchased, the business reduces its taxable income for that financial year. The result being less tax is payable. There is also the option to implement Loss Carry Back offset where applicable. Speak with your accountant as to whether these accounting issues will be applicable and suitable to your business set-up.
If these fast-forward prompts have motivated you to act, we can assist by saving you time with sourcing the cheapest Chattel Mortgage finance so you can concentrate on running the business and still take advantage of what is on offer.
Contact Jade Car Loans at 1300 000 003 for cheaper Chattel Mortgage car finance.
DISCLAIMER: IN REGARD TO MISREPRESENTATIONS AND ERRORS CONTAINED IN THE MATERIAL AS PRESENTED, LIABILITY IS NOT ACCEPTED. THE DETAILS AND CONTENT IS PROVIDED FOR CAR BUYERS AND INDIVIDUALS AND BUSINESS SEEKING FINANCE PURELY AS GENERAL INFORMATION. THIS IS NOT PROVIDED AS THE ONLY SOURCE OF FINANCIAL INFORMATION. ANYONE THAT CONSIDERS THAT NEED FINANCIAL ADVICE ABOUT THEIR SPECIFIC REQUIREMENTS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
