Need to buy equipment for your business?
Consider asset finance to support your operations.
Asset finance is an umbrella term for any loan structure that helps a business purchase equipment, such as vehicles or machinery, for its operations. There are a number of loans designed to suit different situations – these include;
1. Chattel mortgage [or equipment loan]
A chattel mortgage allows you to borrow money to purchase an asset.
Your business owns the asset, but the lender has the asset as security until you complete the repayments.
This frees capital and also gives your business automatic security for the loan.
2. Commercial hire purchase
With this option, the lender owns the equipment and your business pays hire fees to use it, which act as loan repayments.
At the end of the agreed term, your business takes ownership of the asset. This spreads out the cost of the asset.
3. Finance lease
Like commercial hire purchase, a finance lease means the lender owns the equipment and the business pays hire fees to use it.
At the end of the set term, however, the business can choose whether to purchase the asset.
This spreads out the cost of the asset and also provides flexibility.
4. Operating lease
Again, an operating lease means the lender owns the equipment and the business pays hire fees to use it.
The difference is there is no option to purchase the asset.
The leasing costs are deemed operational rather than a liability on your balance sheet.
5. Novated lease
A novated lease is a financial arrangement between a business, an employee and a lender. The business borrows money from the lender for a motor vehicle, which the employee then leases from the business. The business owns the vehicle until the employee repays the loan.
The repayments come from the employee’s gross salary, so there are some tax benefits for the employee.
Small Business Asset Write Off Update
The accelerated depreciation write-off for assets up to $20,000 acquired by small businesses was announced in the May 2015 budget. The write off threshold was previously $1,000 and the concession only applies to businesses in 2015/16 with an aggregate annual turnover of less than $2 million.
However, as a boost for small businesses, the Government has extended access to a number of small business tax concessions by increasing the annual turnover eligibility threshold from $2m to $10m. These measures apply from July 1, 2016.
Key features of the Write-Off Rules
- The asset can be new or second-hand.
- The deduction is claimed in the income year in which the asset is first used or installed ready for use.
- The write-off is for the ‘taxable purpose proportion’ of the asset which is the proportion of the asset’s use in an income year for producing assessable income.
Remember, while the $20,000 accelerated depreciation incentive is attractive to small business owners, spending up to $20,000 on an asset to simply get a tax deduction may not be prudent. As detailed above, there are some specific rules around this concession so we urge you to contact your Accountant before committing to a major asset purchase.
For more information or assistance with your asset finance needs please call 08 8451 1500
Sam, Matt & Andy
Adelaide Mortgage Brokers + a lot more…