The availability of temporary full expensing expires on 30 June 2023 and businesses are encouraged place vehicle and machinery orders now to avoid missing out.
Six months ahead may seem a long way off for many businesses to address a deadline. But there is a compelling case for prompt attention to this particular issue, which we will outline along with how we can assist with suitable finance.
We did provide a brief mention of this in a recent article when updating on a number of looming deadlines for business owners to note. But the benefits available through tax deductions and potentially refunds on tax already paid are so significant, temporary full expensing is worth a more urgent reminder.
Reasons to Act Now
There are a number of reasons why we consider that businesses should seriously consider temporary full expensing for their operation and take actions now, 6 months ahead of the expiry date. For starters, we’re entering the silly season which hopefully for many businesses will be the serious season.
Demand ramps up in many sectors over the Christmas-NY period and with labour shortages in many industries, a lot of business owners will have their hands full just running the operation. For others, it’s time to take a break and resume business activities in late January, early February.
But delaying addressing this tax measure until then may mean missing out due to availability. Temporary full expensing is suited for the purchase of many assets including cars, motor vehicles, trucks, machinery and equipment. All assets which have been experiencing supply chain disruptions over the past few years. Some popular vehicles for example have 6-12 month wait times. FYI – according to reports, the majority of new vehicles which were sold in October were for those that had ordered months previously.
In order for vehicles and equipment to be eligible for temporary full expensing, they need to be operational in the company prior to the 30 June deadline. So it may be necessary to place orders now for low availability goods to ensure they are received in time.
Many operators may not be across all the benefits of temporary full expensing and may need time to discuss the matter with their accountant and consider their options. All time-consuming as the clock ticks toward end of financial year.
Advantages and Benefits of Temporary Full Expensing
While temporary full expensing
and Instant Asset Write-off have been available to eligible businesses since this current offer was introduced in April of 2020, many businesses will still not be fully aware of the advantages available to them.
At the time of its introduction, the early stages of the COVID outbreak in Australia, the timing simply was not right for many operators to invest in new vehicles and equipment. The outlook was uncertain and many would have simply dismissed the initiative and not got around to reconsider it again.
The benefit is quite straightforward to understand. Instead of only writing off or depreciating a percentage of the purchase price or value of new assets each year, temporary full expensing allows for the whole amount to be deducted in the year the asset was acquired. That is a significant difference. It is a much larger tax deduction which then reduces the total taxable income for the business and as such, reduces the income tax obligation for that financial year.
The assets being acquired may include a range of vehicles and equipment but must meet the eligibility criteria as must the business operation.
An additional ‘add-on’ from utilising temporary full expensing may be the opportunity to also utilise another temporary measure – Loss Carry Back
. This allows losses in certain years including 2022/23, to be claimed against profits and tax paid in certain earlier years. This may result in a tax refund.
So there are plenty of benefits available to many businesses.
Suitable Business Finance Product
One of the main criteria for suitability for temporary full expensing is that the assets being purchased must be deemed as depreciable. That is, the business must have ownership title of the asset as posted in their balance sheet. This does not mean it has to be owned outright, the asset may be under finance but it needs to be the right form of finance.
is widely considered as most suitable for this purpose as the business takes ownership of the goods at the time the purchase and the finance arrangements are settled. To illustrate the point, with Leasing it is the lender that holds the ownership rights until the business has finalised all the finance commitments including the residual.
Utilising temporary full expensing with Chattel Mortgage to purchase assets, the business can write-off the purchase price in this financial year and the interest payments can also be claimed as a tax deduction on a schedule based on the repayments.
But reminder, those vehicles and machinery must be working in the business by 30 June, so it could be worthwhile discussing availability and delivery times with your local dealer.
Where large equipment is required to be acquired and that comes with a large insurance premium
, may assist with easing that cost factor. This is a very useful finance facility which may make the prospect of investing in new machinery and equipment more workable and realistic for many operators.
To discuss Chattel Mortgage to suit temporary full expensing for your asset purchases, contact Business Finance Australia on 1300 000 033
DISCLAIMER: THE SPECIFIC PURPOSE IN PROVIDING THIS ARTICLE IS FOR GENERAL INFORMATION ONLY. IT IS NOT INTENDED AS THE SOLE SOURCE OF FINANCIAL INFORMATION ON WHICH TO MAKE BUSINESS FINANCE DECISIONS. BUSINESS OWNERS WHO REQUIRE ADVICE OR GUIDANCE AROUND THEIR SPECIFIC FINANCIAL CIRCUMSTANCES ARE RECOMMENDED TO CONSULT WITH AN ADVISOR OR ACCOUNTANT. NO LIABILITY IS ACCEPTED IN REGARD TO ANY MISREPRESENTATIONS OR ANY ERRORS RE ANY DATA, SPECIFICS, POLICIES AND OTHER INFORMATION AS SOURCED FROM OTHERS.