Over the first half of 2021, there were more than a few major events to distract business owners from their businesses. Budget time in May-June was backed-up almost immediately by EOFY time which happened right amid yet more COVID-19 outbreaks. Time for those daily press conferences and announcements to stay across how it affects you and deal with the relevant fall-out. With several states sent into lockdown, it was a disruptive few months, with plenty of issues to divert attention away from the main game – your business plans.
While for millions in the Greater Sydney and adjacent LGAs, the lockdown continued for a long time, finally the time came for business operators to get back to business. To refocus attention back to where you were some months back. Time to revisit and address business plans and decisions or risk playing catch up later in the financial year. Moving on with taking advantage of the tax measures on offer with motor vehicle investment plans. That’s right. Remember IAWO and other budget tax measures that you intended to take advantage of back in June/July?
The excitement and optimism around temporary full expensing and loss carryback may have been overshadowed somewhat by recent COVID issues and support measures. But those options are still on the table and the clock is ticking. Jade Car Loans provides an update and reminders to refocus on business finance and the deals available for those essential business vehicle purchases.
Reminder: Tax Deals on the Table
In the 2021/22 Federal Budget, Treasurer Josh Frydenberg announced an extension of temporary full expensing for eligible businesses and eligible assets. This is essentially an extension and amendment to the widely-lauded Instant Asset Write-off which was introduced as a stimulus measure in the early stages of the coronavirus pandemic.
Regarding the purchase of business vehicles, eligible businesses can realise the full purchase price of the asset as a tax deduction in the financial year of purchase. This compares very favourably to the alternative, usual process which is to depreciate an asset incrementally over multiple years.
Businesses get to deduct the vehicle price as a business expense for one year. Hence the term ‘full expensing’. The ‘temporary’ refers to the measure being in place for a set period only. For some businesses, it may to 30 June 2023.
To be able to claim this expense as a tax deduction, the vehicle must be purchased with the appropriate form of finance. To ‘write-off’ or depreciate an asset, that asset, in this case a vehicle, needs to be posted to the business balance sheet. The business must have ownership of the asset to claim a depreciation benefit.
Sole trader car financing is seen as the most appropriate form of finance as the buyer takes immediate ownership of the vehicle while the lender has the vehicle as a security guarantee against the loan. With say commercial car leasing, the vehicle ownership is retained by the lender which means the borrower is not in a position to depreciate that asset.
Another tax measure that can be realised regarding vehicle purchases is Loss of carryback. This is a measure introduced to provide a direct cash refund to eligible businesses. If a loss is posted by the business in the relevant years, which coincide with the COVID-effected years, that loss can be carried back and claimed against profits made in set earlier years. Where tax was paid in the profitable years, it may be refunded when the current losses are carried back.
Temporary full expensing can work in concert with loss carryback. By claiming temporary full expensing with the purchase of a business vehicle, the business may then post a loss in this financial year. That is claiming such a large expense as the cost of a new ute or other work vehicle may cause the business to show a loss. That loss can then be claimed against profits made earlier and the tax paid refunded.
Although you may have been distracted of late, these measures are still on the table and may be available to your business with the acquisition of new work vehicles. As we said, time to refocus!
Update on Interest Rates
Interest rates continue at historic low levels and despite good unemployment figures in June, the extended Sydney lockdown is predicted to cause negative impacts on the economy and there is little doubt that the RBA will leave rates on hold according to their stated intentions.
We continue to offer cheap business car finance rates across all our loans with Chattel Mortgage and Commercial Hire Purchase offering the lowest. Another incentive to purchase that new vehicle with our cheap Chattel Mortgage deals. Receive the lowest interest rate, claim all the GST on the next BAS return and be in a position to claim the tax deductions of temporary full expensing in this financial year.
Finance Options and Market Outlook
If Chattel Mortgage is not for you, we of course offer the full portfolio of business vehicle finance including low doc car loans, Leasing, and CHP. Leasing suits many businesses that do not want the asset appearing on their balance sheet. The leasing payments are fully tax deductible for most businesses, so a tax benefit is realised. Refer to our Interest Rates Calculator to see the difference in repayment estimates across all loan types.
One of the hiccups facing motor vehicle buyers has been supply issues. Component shortages, COVID and supply chain issues in the major vehicle manufacturing hubs globally have led to delays in some makes and models reaching the Australian market. If you are looking to secure your order, speak with us about pre-approved car finance. We can arrange your finances ahead of you making the actual purchase, providing confidence to proceed with placing that order.
In the work vehicle market, the June sales data shows the Ford Ranger as the top seller, followed by the Toyota HiLux and Isuzu D-Max. Due to the recent distractions across the country, EOFY deals may be extended. Time to refocus and get moving with those business vehicle purchase plans.
Contact Jade Car Loans at 1300 000 003 for a cheap interest quote on your business vehicles.
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.