Act Fast or Miss Out this EOFY
With low interest rates and the government’s temporary full expensing initiative in place, we are expecting processing delays of up to two weeks in the lead up to end of financial year (EOFY). Get ahead of the crowd by calling your broker today!
Historically, EOFY is the busiest time on the equipment finance calendar. With just 9 weeks to go until the June 30 EOFY deadline, there are a few things to think about if you are looking to buy new or upgrade your existing vehicles and equipment.
All lenders face increased deal volumes at EOFY typically resulting in significant processing delays. We recommend allowing extra time to get your finance sorted. As a guide, you should allow:
- 2 weeks for application approval.
- 5 days for settlement finalisation.
While every effort is made to turn your transaction around in a shorter timeframe than this, it is best to prepare for the worst-case scenario and get in early.
You can get a preapproval now which will speed up the process when you do choose to purchase an asset closer to EOFY.
The Ins & Outs of Temporary Full Expensing
An extension of the government’s Instant Asset Write Off Scheme, temporary full expensing allows eligible businesses to immediately deduct the business portion of the cost of eligible depreciating assets purchased post the Federal Budget announcement on 6 October 2020 and installed for use by 30 June 2022. Furthermore, the business portion of the cost of improvements to both existing and eligible depreciating assets purchased within the same window of time can also be immediately deducted.
Put simply, rather than claiming tax deductions over the life of the asset under standard depreciation rules, you can immediately write off the full cost in the financial year it was first used or installed for use.
The aim of this initiative is to stimulate investment to support the economic recovery from COVID-19. With reduced tax payable comes increased cash flow for businesses and therefore more money to invest in assets.
Under this initiative, businesses with an aggregated turnover of less than $5 billion can immediately deduct the full cost of new assets. If assets are second hand, the business must have an aggregated turnover of less than $50 million to be able to deduct the cost of the asset.
Depreciating assets for which temporary full expensing can be applied are those which were or are purchased and first used or installed for use between 6 October 2020 and 30 June 2022.
All eligibility criteria and information about temporary full expensing can be viewed on the ATO website.
It is important to note that businesses can only deduct the business portion of the cost of the asset or its improvements. If your asset is used 50% for business purposes and 50% for personal purposes, only 50% of the cost can be deducted.
Cars are subject to the car tax limit which, for the 2021 financial year is $59,136. This means if you buy a car worth $80,000, you can only tax deduct the value of $59,136.
At Magnolia Lane, we tailor finance solutions specific to your unique business needs. It is our role as your equipment finance broker to source the best possible rate for you. Through our accreditation with a suite of lenders, there really is no limit to what we can assist with. Contact us or get a free quote today and let’s grow together.
Our advice is general in nature and should not replace that of a qualified accountant. It is best to speak to your accountant before making an investment. Investments should always serve a purpose and fit within your company’s budget.