Many business operators wait until they start to see ads and promos for EOFY before they address annual business tax planning. Yes, we agree, EOFY is a popular time for car sales and discounts and it is a great time to buy. But if you wait until June to make that purchase decision, you could be 'running the clock down' to get everything in place and finalised by 30 June. A time of year that can be hectic enough for many businesses as they engage in their own EOFY offers to their customers. So why wait till June to purchase that new business vehicle or company car? Tax benefits can be realised on Jade's selection of business car loans from the time of settlement. Depending of course on which finance product you select to purchase your vehicle
As we head into the final months of FY20/21, we think it’s timely to provide an update on the taxation and other cost benefits to businesses of the different business finance products available.
Business Vehicle Finance Options
Jade Car Loans offers a full portfolio of finance products for our business customers.
- Car loans for sole traders: also known as Equipment loans by major banks.
- Leasing: This can be referred to as Finance Lease.
- Explore CHP Financing (CHP) or simply Hire Purchase.
- Novated Lease with Salary Sacrifice: for employees looking to provide a car for staff where staff member sacrifices their salary.
Selecting the appropriate finance option will depend on the accounting method used by the business and several other accounting-related issues. It is advised to refer to an accountant or financial advisor in making this decision.
Key Differences: Business Finance v Personal Car Loans
If you’re wondering if you should purchase your new vehicle as your company vehicle or as your car we outline the key differences to consider. The key differences between business finance products and personal car loans include:
- The option to include a balloon for Chattel Mortgage and Hire Purchase and a residual for Leasing is available on business finance products and only occasionally on personal car loans. This is a percentage of the purchase price which is set aside from inclusion in the monthly repayments and is due for payment in full at the end of the finance period. This allows business buyers to structure repayments to better suit their cash flow and spread the cost of vehicles over an extended period. The balloon/residual can be paid out from cash equity when due or businesses can consider refinancing options.
- Lower interest rates apply to business vehicle finance over personal car loan interest rates. This applies to Jade Car Loans offers and generally across the motor vehicle lending market.
- Business vehicle finance includes tax deductible elements which are approved under ATO rulings. If claiming personal car allowances and other vehicle expenses for using a private car for business purposes, taxpayers will need to meet ATO guidelines and may need to have receipts, a log book and other evidence to accompany a tax return. Referring to a tax agent is advised.
- The range of finance products available for business buyers is more extensive than for personal car loans. Businesses can select a finance facility that best suits their business set-up and financial objectives.
Eligible Businesses
To be eligible for business vehicle finance, the vehicle needs to be used primarily for business purposes meet ATO guidelines and be purchased by a business entity. It’s worth noting, as covered in detail in another of our news articles, the ATO accessing new vehicle rego data from state authorities to cross-match with their records to manage taxpayer compliance.
Jade Car Loans offers business vehicle finance to a wide range of business structures and set-ups:-
- Sole traders and owner operators
- Partnerships and family enterprises
- SMEs and large corporations
A minimum requirement for business vehicle finance is to hold a current ABN and have identification. Lenders will also request a range of financial documentation about the business’ financial status and credit history. If a business does not have all the docs, Jade can pursue a low doc car finance quote for the business.
Tax Treatment
- If purchasing a vehicle with Chattel Mortgage finance, the full GST that applies to the purchase price can be claimed on the next BAS after settlement. GST is then not applicable to the repayments.
- Leasing repayments are considered an operating expense and as such GST is applied to these but not the interest portion.
- Subject to individual businesses meeting ATO guidelines, Leasing payments are usually accepted as a tax deductible operating expense.
- Only the interest portion of Chattel Mortgage repayments is a tax deduction but depreciation on the car as an asset is applied as a deductible item when the end of year income tax return is prepared.
- If considering IAWO, Chattel Mortgage is the more suitable form of finance. All are subject to meeting eligibility criteria.
Structuring Your Car Finance
The key objective of undertaking any major business expense is to optimise cost-effectiveness and maximise tax effectiveness. Individually structuring your car finance contract can be key to achieving these objectives and that is a key service provided by Jade Car Loans.
Selecting Jade Car Loans as your vehicle lender provides you with an individualised service to source both the cheapest car finance and to negotiate with the financier to structure your deal with terms and elements that suit you. In addition to our accreditation with the major banks, we are accredited with non-bank lenders that can offer greater flexibility regarding finance structure, conditions and terms.
To make the most of the tax benefits of vehicle finance for the final period of FY20/21, why not move now on that new vehicle purchase rather than wait for the EOFY rush? Deals on vehicles are there to be captured and our cheap business car finance rates are waiting for you.
To discuss business vehicle finance contact Jade Car Loans at 1300 000 003
DISCLAIMER: PLEASE NOTE THAT THIS INFORMATION IS PROVIDED PURELY AS A GENERAL INFORMATIVE ARTICLE AND IS NOT INTENDED AS A SINGLE SOURCE FOR MAKING FINANCIAL DECISIONS. THOSE THAT CONSIDER THEY REQUIRE ADVICE IN REGARD TO THEIR FINANCIAL SITUATION ARE ADVISED TO REFER TO A FINANCIAL ADVISOR. NO LIABILITY IS ACCEPTED FOR ERRORS OR MISINTERPRETATIONS IN THE DATA, FIGURES, DETAILS AND OTHER INFORMATION AS SOURCED FROM OTHER SOURCES.
