With many businesses receiving some form of government support through 2020 in respect to the economic impacts of COVID-19, the announcement of the 2020/21 Federal Budget was much anticipated. Individuals and businesses were keen to see what was ahead for them in terms of longer term policies and measures. Josh Frydenberg, the Federal Treasurer, made the formal announcement of the Federal Budget on 6 October 2020 with a key strategy of jobs creation and boosting confidence through business investment.
For those looking to explore Truck Refinancing, this announcement was particularly interesting. At Jade Truck Loans, our major focus is not only providing Commercial Heavy Vehicle & Truck Loans but also ensuring what is in the best interests of our customers. So, we’ve unpacked a selection of the budget inclusions that we consider of greatest relevance to our customer base. Policies and benefits to businesses that impact your decision around investing in a new truck and may streamline the process, such as Cargo Trailer Financing and Lease Commercial Vehicles options.
At this stage, the Budget Bill is yet to be formally passed by Parliament and legislated so we are providing a brief overview of key announcements. When the ATO and Treasury provide Fact Sheets on each particular policy and more detail on specific measures is available, we will drill down and provide further explainers.
Business Investment Incentives
The Budget delivered significant incentives for many business to invest in assets with the Instant Asset Write-Off scheme extended again and an Investment Allowance package included. IAWO was introduced early in 2020 with a 30 June deadline then extended to 31 December 2020 and has now been further extended to 30 June 2020 for eligible businesses. Assets must be purchased and in operation in a business by the deadline date to be eligible.
Jade is just one of many lenders as well as truck sellers and manufacturers who have been ‘reminding’ business owners of the IAWO over the past 6+ months and we’re pleased to see it extended. Larger businesses are also set to benefit from the package, and we offer a comprehensive Truck Finance Calculator for those considering their options.
The details we have sourced to date include:-
- SMEs (turnover up to $500 million): IAWO extended to 30 June 2021. Write-off eligible assets, value up to $150,000 fully in same tax year.
- SMEs (turnover up to $500 million): second-hand assets subject to ‘full expensing’
- Temporary tax incentive to include larger businesses (turnover up to $5 billion): eligible assets purchased between 6 October 2020 and 30 June 2022 can be fully deducted in relevant tax year. Assets to be in use by the deadline of 30 June 2022
- Under the existing IAWO scheme, second-hand assets up to $150,000 acquired by 31 December 2020 businesses in the $50-$500 million turnover category to be fully deductible in 20/21 tax year.
These measures should include many truck operators and include the purchase price of a wide range of trucks across light commercials, medium duty, and heavy vehicle categories. And for those who are unsure about the financial implications, we have How Chattel Truck Mortgage Loan Works and other resources to guide you. It is our understanding that the write-offs are not limited to any specific number of assets. IAWO can be applied to the acquisition of a number of eligible assets.
We are yet to drill down into the detail of these announcements and await the release of directions from the ATO. In all instances, business owners are advised to Check With Your Accountant in regard to their individual business requirements.
Another budget measure designed to support business cash flow is the loss carry-back. To explain – the current rulings around company losses require business to carry losses forward and offset against any profits made in future years.
Under the measures announced in the budget, eligible business (turnover under $5b) can carry the losses back. That is, company losses made in the 2019/20, 2020/21 and 2021/22 tax years can be offset against profits in 2018/19 and later years. The offset would be limited to the amount of the previous profit. This would generate a tax offset and as such improve cash flow.
Wage Subsidy Schemes
While the JobKeeper wage subsidy scheme is being wound back over the next few months, the budget included a new wage subsidy scheme to encourage businesses to employ new staff, especially younger workers.
The schemes include a $100-$200 per week subsidy for employing younger workers, valid for 12 months and additional schemes to support the wages of apprentices and trainees.
Realising the Budget Benefits: Loan Products
In order to be in a position to realise the benefits of the investment allowance and IAWO schemes, businesses need to ensure they acquire assets with the appropriate loan product. That means, in order to depreciate/write-off an asset, that asset must appear on the business balance sheet.
Rent to Own and leasing are off balance sheet loan types where the asset is not entered on the borrower’s balance sheet. Chattel Mortgage is a loan product where the asset does appear on the borrower’s balance sheet and is depreciated under ATO rulings.
Leasing and Rent to Own however, do offer other tax benefits so we advise that businesses refer to their accountant in deciding which way to go in regard to their truck loan.
There is a lot to take in with this Budget and we will continue to stay across developments and provide further explainers. If you would like to move quickly and initiate a truck purchase, our Jade Truck Loans consultants are ready to assist you with a cheap truck loan quote.
To discuss a truck loan to realise the benefits presented in the 2020/21 Federal Budget, contact Jade Truck Loans on 1300 000 003
DISCLAIMER: THE DETAILS, INFORMATION, DATA AND MATERIAL PRESENTED IN THIS ARTICLE HAS BEEN SOURCED, IN FOOD FAITH, FROM REPUTABLE SOURCES IN THE PUBLIC DOMAIN. INFORMATION IN RESPECT OF GOVERNMENT ANNOUNCMENTS, POLICIES, PROGRAMS, MANUFACTURER’S GOODS AND SERVICES AND OTHER SUBJECT MATTER IS OFFERED FOR GENERAL INFORMATIVE PURPOSES ONLY AND NOT IN ANY WAY INTENDED AS A SOLE SOURCE FOR THE PURPOSE OF MAKING FINANCIAL DECISIONS. NO LIABILITY IS ACCEPTABLE FOR ANY ERRORS OR MIS-INTERPRETATION OF FACTS AND MATERIAL. IF A PERSON CONSIDERS THEY REQUIRE FINANCIAL ADVICE IN REGARD TO THEIR SPECIFIC AND INDIVIDUAL CIRCUMSTANCES, THEY SHOULD SEEK INDEPENDENT ADVICE FROM A FINANCIAL ADVISOR.