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Making the most of the instant asset write-off before the EOFY deadline

Two months and counting (down). That’s how long your business has to make use of the $150,000 instant asset write off before the end-of-financial-year June 30 deadline.

Early last month, just as coronavirus was ramping up in Australia, the federal government increased the instant asset write-off threshold from $30,000 to a whopping $150,000 as part of its economic stimulus package.

Under the scheme, businesses can immediately write off the cost of assets such as vehicles, tools, equipment and – thanks to the recent threshold increase – heavy vehicles, tractors and machinery.

Better yet, the threshold applies on a per asset basis, so eligible businesses can immediately write off multiple assets.

Is your business eligible?

Not only was the threshold increased, but the scheme can now be accessed by businesses with an annual turnover of up to $500 million (up from $50 million).

Assets that could be immediately written off include a concrete tank for a builder, a tractor for a farming business, or a truck for a delivery business.

But it’s not enough to simply purchase the asset to be eligible. The new or second-hand asset must also be first used, or be installed and ready for use, this financial year.

Now, it’s important to keep in mind that “write-off” doesn’t mean “free asset”.

Basically, this initiative allows you to immediately claim all the tax deductions you would have claimed over the life of the asset.

This can help with your business’s cash flow, as getting the cash back sooner means you can re-inject it straight back into other parts of your business.

Bruce’s tractor: a case study

Say ‘gday’ to Bruce, who runs Fair Dinkum Farms in the Darling Downs and has an aggregated annual turnover of $25 million for the 2019‑20 income year.

In May, Bruce finally splashes out and purchases the second-hand tractor he’s had his eye on for a while now for $140,000, exclusive of GST, for use in his business.

Under the new $150,000 instant asset write‑off, Fair Dinkum Farms can claim an immediate deduction of $140,000 for the purchase of the tractor in the 2019‑20 income year.

This is $136,101 more than he could have immediately claimed under normal arrangements, as Bruce would have only been able to claim $3,899 using the diminishing value method over a 12 year period.

At the company tax rate of 27.5%, old mate Bruce will pay $37,427.78 less tax in 2019‑20 than he would have if the instant asset write-off scheme wasn’t in place.

This will improve Fair Dinkum Farms’ cash flow and help Bruce’s business withstand the economic impact of the coronavirus.

Limits relating to cars

Now, there’s a limit relating to cars that we should note.

If you purchase a car for your business, the instant asset write-off is limited to $57,581 (the business portion of the car limit) for the 2019-20 income tax year.

You cannot claim the excess cost of the car under any other depreciation rules.

Also, say the vehicle will be used 80% of the time for business purposes and 20% for personal usage, you can only claim deductions for 80% of the asset.

Getting finance that’s right for your business

When purchasing an asset under this scheme, it’s crucial to select the correct finance product.

And that’s where we can help out. We can present you with financing options for the instant asset write-off scheme that are well suited to your business’s needs now, and into the future.

So if you’d like help obtaining finance that’s gentle on your cash flow, and helps you achieve your long-term goals, please get in touch on 02 6021 6600 this month well ahead of the deadline – we’d love to help out.

Disclaimer: The content of this article is general in nature and is presented for informative purposes. It is not intended to constitute financial advice, whether general or personal nor is it intended to imply any recommendation or opinion about a financial product. It does not take into consideration your personal situation and may not be relevant to circumstances. Before taking any action, consider your own particular circumstances and seek professional advice. This content is protected by copyright laws and various other intellectual property laws. It is not to be modified, reproduced or republished without prior written consent.

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The staff at MAKE Finance Group are experienced and dedicated to providing our clients with exceptional levels of advice and service.

As a full service finance broker, we can save you time and stress as we negotiate with Banks and Financiers on your behalf. Whether it is asset or equipment finance, business finance and advice or even a home loan, we will go to the market on your behalf and find the best possible deal available.

Let us worry about the financials, as we make it happen for you.

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The staff at MAKE Finance Group are experienced and dedicated to providing our clients with exceptional levels of advice and service.

MAKE Finance Group holds sought after commercial lending accreditations and access to a substantial panel of lenders for both Equipment and Business Finance.

As a finance broker MAKE Finance Group saves you time and stress as we negotiate with Banks and Financiers on your behalf. This allows you to keep focused on your business while we do the finance work.

This ensures you receive the best offers with the objective of saving money and increasing profitability.

Testimonials

Here is what a couple of our clients have said about MAKE Finance Group.
  • Geoff at MAKE Finance Group made the process of purchasing an investment property a seamless process. Thanks for your patience Geoff. I would highly recommend Geoff and his team at MAKE for all your finance needs. Cathy, Warrnambool

  • Geoff and Christine helped me from the ground up with acquiring my first home loan, they helped me from the application process all through to small advice on how to take on the new world I've been introduced to. I am honestly glad to have been referred to MAKE Finance Group, I couldn't have found someone as thorough, professional and friendly to have helped me along the way. Paul, Albury  

  • Geoff and the team at MAKE Finance were unbelievably helpful when we needed to refinance our business loan. After a stressful and confusing ordeal with our existing lender, Geoff made re-financing so easy, and it tool very little work from our end to sort everything out. We are so happy with everything sorted and not having to worry about our finance arrangements. We would encourage anyone with any financing needs to go and see Geoff and the team at MAKE Finance, thanks Geoff! Philip and Jenni, Holbrook

  • Thank you to the team at MAKE Finance Group, for helping me purchase my first truck. I cannot thank them enough as they went above and beyond all my expectations and made the whole process easy and stress free, I would highly recommend them to anyone. Rob, Canberra

  • Applying for a business loan (direct through a Bank) was becoming a stressful and difficult task for us as everything had to be discussed over the phone followed by numerous paperwork. Geoff at MAKE Finance Group was our savior. Your personalised service made the application for our business loan & business vehicle loan so easy. We now operate a very successful business & we could not have done this without you. We love your work! Lloyd & Kristy Franchisee of Jim’s Mowing Wodonga East

  • “MAKE Finance Group were an absolute pleasure to deal with. Right from the very beginning, even when we were just asking questions as to how home loans work and how much we could afford, they made the process incredibly easy and put everything into terms that we could understand. There’s a lot involved with buying your first home, but it felt effortless with the superb help from both Jess & Geoff. MAKE Finance Group definitely come highly recommend from us – thanks guys!” Sophie & Zach, Albury

  • “Buying a new car was a big deal for me as I had a very strong love for my only car of 10 years.  I approached MAKE Finance Group to help me source a loan for my new car, and they made me feel 100% positive about making the change, as the process that they followed to obtain the loan was flawless. They came to me which I hugely appreciated, everything was in order and all follow ups and questions were answered without hesitation. I cannot recommend them enough for their professional and friendly service.” Stephanie, Albury

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