Tax benefits of financing new equipment

Grow your business and benefit from tax concessions? It sounds too good to be true, but self-employed workers and small business owners have until 30 June to achieve this win-win combination.

Grow your business and benefit from tax concessions? It sounds too good to be true, but self-employed workers and small business owners have until 30 June to achieve this win-win combination.

Valuable tax savings are up for grabs for small businesses that purchase new plant and equipment priced up to $20,000.

If you're a business owner, it gives you just a few weeks to plan your business needs for the year ahead and take advantage of low business finance rates, and tax savings, to equip your business for growth.

No matter whether you're planning to start a new business or you already run a thriving enterprise, it makes sense to invest in new plant and equipment. It can be the key to improved customer service, more efficient operations, or letting your business tap into the latest technology.

Business owners are often short on time, but it makes good commercial sense to think about these investments ahead of 30 June. The key driver here is the ability to claim an instant tax write-down for new plant and equipment costing up to $20,000 purchased in the current financial year.

A sweetener from the 2016 Federal Budget, this generous tax saver was scheduled to end on 30 June 2017, however, an extension to 30 June 2018 was propsed in the recent May budget announcement.

After this, most new equipment must be depreciated gradually over time, so it's definitely worth taking advantage of the instant write-down while it's still available - but the asset must be ready to go for use in your business on or before 30 June.

The fine print

Tax breaks should never be the sole motivator for any business decision. It's important to clearly define how the equipment will benefit your business by working out the likely return on investment. And, as cash is often considered to be king, it is critical to be certain your business can afford to fund the purchase of the equipment.

The good news is that the instant write-down doesn't just apply to new equipment. If you run a café for instance, the purchase of a second-hand espresso machine costing, say, $5,000 will qualify for the instant write-down.

The $20,000 immediate write-off applies to multiple separate purchases. So if you buy four cars for your business fleet – each costing $15,000, you can claim an immediate tax deduction of $60,000.

Almost all business equipment is eligible for the write-down including motor vehicles, furniture, computer equipment, plant and equipment, tools and even artwork for your reception area.

Financing your new business assets

For many small businesses, the catch in this generous tax break is finding the funds to purchase new plant and equipment – and understanding the different types of asset finance available.

The term ‘asset finance' covers a range of different options each suited to particular circumstances. Along with traditional business loans it can include:

  • Equipment loan (chattel);
  • Commercial hire purchase;
  • Finance lease; or an
  • Operating lease.

Good advice from one business owner to another

As a small business operator, your Mortgage Choice broker understands how challenging it can be to know which funding option is right for your business. With access to an extensive panel of lenders, your Mortgage Choice broker can pinpoint the finance strategy that works for your business and the most competitively priced lender to suit your cash flow.

When you arrange asset finance through Mortgage Choice, you won't even have to take time out of your business to negotiate with lenders. Your Mortgage Choice broker will streamline the funding process by handling all the paperwork on your behalf and liaising with the lender until finance is settled.

Talk to your Mortgage Choice broker about asset finance today to take advantage of valuable tax savings while equipping your business for growth.

Posted in: Asset finance