Amidst the surging fuel prices and mounting pressures on living expenses, a significant portion of the population turned to this year's Federal Budget in hopes of finding some form of relief. Prior to the official announcement, both Treasurer Josh Frydenberg and the Prime Minister had alluded to the budget being centered around addressing the rising cost of living. For individuals in the truck ownership and operation sphere, the annual budget could potentially unveil avenues for business growth and potential tax advantages. Furthermore, those contemplating the acquisition of new vehicles may find themselves evaluating the potential impact on truck loans as well.
The intersection of the Federal Budget and truck loans is marked by several key connections. Firstly, tax benefits arising from acquisitions can play a pivotal role, as can any adjustments to interest rates resulting from measures aimed at influencing economic drivers like unemployment. Moreover, the infusion of new work opportunities generated by infrastructure investments can contribute to enhancing the viability of purchasing new vehicles.
We bring you a brief summary of the key aspects of the Federal Budget 22/23 including how the measures may impact truck loan interest rates for business operators to consider in relation to upgrading their vehicles.
General Overview
On the 29th of March, the Federal Treasurer, The Hon Josh Frydenberg, presented his 2022 Budget Speech before the House of Representatives. In his opening statements, he acknowledged the prevailing uncertain circumstances, citing events such as the conflict in Europe, the global persistence of the pandemic, and the devastating floods that have affected communities.
He went on to mention that despite the challenges of the past two years, Australia's resilience and the strength of its people have remained unwavering. Highlighting that Australia's recovery is leading the international scene, surpassing the likes of the US, UK, Japan, Canada, and Germany in terms of robustness and swiftness.
Unemployment has reached its lowest point in 48 years, sitting at a mere 4%. The Treasurer affirmed that this budget aims to further reduce this level through the advancement of higher wages and an increased availability of jobs.
Having attained the goal of achieving low unemployment and with the immediate necessity for emergency support behind, he stated that the Federal Government has shifted its focus to the subsequent phase of fiscal and economic strategy.
Major Measures
- The highly anticipated Budget measure announced was in regard to the fuel excise. Effective as of the Budget night, the Government has reduced the 44c per litre excise to just 22c per litre for the next 6 months.
- Another key measure for those earning below the $126,000 threshold is the addition to the Low and Middle Income Tax Offset of $420. This brings the total possible LMITO to $1500. It needs to be realised that this is not a handout of cash which taxpayers will receive instantly. A tax offset is a deduction from taxable income which is worked out during the personal income tax assessment. The amount of the offset is on a sliding scale up to the $1500 maximum. It is deducted from gross income to reveal the taxable income amount. Most taxpayers then received a tax refund. This measure was introduced as a temporary COVID-19 measure and this announcement increases the amount for this financial year. Taxpayers will receive the applicable funds after submitting their annual income tax return.
- A key measure for truck operators is the extension of the IAWO for eligible asset acquisitions and eligible businesses through to the end of the 22/23 financial year. So when trucks are acquired with the appropriate loan type, the full purchase value can be written off as a tax deduction in that financial year. If you are interested in this measure, please speak with us about Chattel Mortgage for truck & trailer finances. This loan type is considered most suitable for IAWO.
- Small business tax cuts are also included in the budget. The rate is to be cut from 30% to 25%
- Small business also receives additional tax benefits when investing in digital technologies. These can include e-invoicing, web design, cloud computing and cyber security technologies. A $120 deduction can be realised for every $100 spent.
- Spending on skills and training by small businesses also receives the additional 20% tax benefit. For each $100 spent on employee training, a deduction on tax of $120 can be claimed.
Business Opportunity Measures
Numerous truck operators have the potential to benefit from fresh business prospects arising from the investment-oriented provisions outlined in the Budget. Notably, these entail an augmented allocation of $1 billion for the Modern Manufacturing Strategy, as well as an additional infusion of $17.9 billion into infrastructure initiatives. The scope of infrastructure projects encompasses categories such as rail systems, renewable technology advancements, and notably for truck operators, road enhancements.
In an effort to streamline the interface between businesses and the Federal Government, the Budget introduces a series of measures pertaining to reporting requisites. These measures are designed to curtail costs and time commitments for business operators, thereby fostering improved cash flow. If you're exploring ways to optimize your financial strategies, including Commercial Heavy Vehicle & Truck Loans, these developments could have significant implications.
As with all Budgets there is a lot to digest and sift through to get to opportunities in specific sectors. To read all the details head to the official Budget website.
Truck Loans Update
Interest rates are top of the agenda for most business operators and considering upgrading vehicles or expanding their fleet. The Budget and the Government does not set interest rates as in the official cash rate. RBA sets the interest rates and business finance lenders establish their own rates and lending guidelines.
The measures and policy directives outlined in the Budget are strategically aimed at influencing two critical metrics: inflation and unemployment. These factors hold paramount importance to the Reserve Bank of Australia (RBA) when considering potential adjustments to interest rates.
As unemployment continues to decline and inflation trends upward, there emerges a robust possibility of the RBA initiating interest rate adjustments during the course of this year. Such changes may not be isolated occurrences; rather, they could transpire over a span of several months. Currently, prevailing interest rates are positioned at historically low levels, underlining the potential value of taking proactive steps prior to their potential ascent.
While certain measures from the Budget are set to take effect immediately, as indicated by the Treasurer, others will require passage through the Budget Bill before being implemented. For more information on various financial aspects, including Truck Loan Products, please don't hesitate to reach out.
Contact Jade Truck Loans on 1300 000 003 to discuss financing new truck finance.
DISCLAIMER: THIS INFORMATION IS ISSUED PURELY FOR THE PURPOSE OF GENERAL INFORMATION PROVISION. IT IS NOT TO BE TAKEN AS THE ONLY SOURCE OF INFORMATION FOR BASING FINANCIAL DECISION-MAKING. THOSE REQUIRING FINANCIAL GUIDANCE AND ADVICE SHOULD CONSULT WITH THEIR FINANCIAL CONSULTANT OR ADVISOR. NO LIABILITY IS ACCEPTED FOR ANY MISREPRESENTATION OF POLICIES, DATA OR ERRORS IN THIS CONTENT.
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