The Instant Asset Write-off emerged as a prominent topic in early 2020, following the Federal Government's implementation of this expedited asset depreciation initiative as part of its pandemic-related stimulus package. This measure was later refined in late 2020, transitioning into temporary full expensing. However, as the term 'temporary' implies, this tax incentive, which offers substantial benefits, carries an expiration date of June 30, 2023.
Given the prevailing challenges posed by supply chain disruptions impacting various manufactured goods, we wish to remind operators that the present moment could present a favourable opportunity. It may be prudent to seize the current circumstances and leverage Chattel Mortgage truck finance to facilitate vehicle acquisitions, thereby capitalizing on the advantageous timeframe provided by temporary full expensing before it concludes.
When these accelerated asset depreciation measures were first announced and following that when they were amended, we posted numerous articles as explainers. Explainers which covered the tax measure details and how the choice of loan type was an important consideration. These articles can be found in our News library. Chattel Mortgage truck finance is considered the most suited loan type for businesses seeking to take advantage of the benefits of temporary full expensing.
So much has happened in recent times on many levels, that temporary full expensing may have been somewhat overlooked or forgotten. To bring it back into full focus, we’re providing this timely recap on the concept and the suitable finance product.
Recap: Accelerated Asset Depreciation Measures
Accelerated asset depreciation measures are introduced by the Federal Government and implemented through the ATO at times as temporary measures. The current temporary full expensing is such a measure. As mentioned above, in its current format it was introduced in late 2020 as an amended version of Instant Asset Write-off, which is also an accelerated asset depreciation measure. Essentially these are the same in concept but with varying eligibility criteria at this time.
Temporary full expensing allows for the full purchase price of eligible assets, as designated by the ATO, to be deducted by eligible business in the same year that the asset was acquired.
Why is this different? Under the normal tax rulings only a portion of that purchase price or the value of the asset would be depreciated or become a tax deduction each year. The asset would be depreciated in accordance with the ATO schedule.
Why is this a benefit? It allows businesses a greater deduction in that year which essentially reduces the taxable income and as such the tax payable. A measure which was introduced to reduce business expenses, motivate businesses to invest in new equipment and as such stimulate the economy.
As an extension or add-on to this benefit is the opportunity to claim Loss Carry Back. If the business posts a loss due to the tax deduction realised through the asset acquisition, that loss can be claimed against profit made and tax already paid in specific, previous years. This may result in a cash refund of tax paid in a specific year.
Business operators are encouraged to check the eligibility criteria and discuss the suitability of this measure with their accountant.
Suitable Truck Finance Products
Key to being in a position to utilise this tax measure is acquiring the asset with the appropriate form of finance. The asset is depreciated and in order for that to happen the asset must be owned by the business and it posted to their balance sheet.
This is what occurs when acquiring new assets such as trucks with Chattel Mortgage truck finance. On settlement and finalisation of the finance, the ownership of the truck transfers to the business. The truck is entered onto the business balance sheet.
This is best illustrated by comparison with say Leasing. With Truck Leasing the ownership is retained by the lender. The business does however, receive tax deductions as the lease payments are fully tax deductible.
There are a range of considerations in regard to selecting the most appropriate finance product. The decisions include a number of accounting matters. As such, we strongly advise businesses to discuss this with their accountant.
Many different types of businesses may be eligible for temporary full expensing including new business operators. To assist all businesses to utilise this measure, we provide Chattel Mortgage truck finance at cheaper interest rates for many business set-ups. For new businesses we provide Low Docs and No Doc Truck Finance with choice of loan product, including Chattel Mortgage.
While the deadline for temporary full expensing is 30 June 2023, another compelling reason to make the investment in new trucks now with Chattel Mortgage is the interest rate situation. Chattel Mortgage does attract the lowest rate across the selection of business finance products. But as the RBA moves on rates, lenders respond across most lending sectors. Further rate rises are expected as early as October 2022.
As we approach the bustling end-of-year period, a time when business investment decisions can often take a back seat due to heightened operational demands across various industries, it becomes crucial to streamline the process. To facilitate business owners in efficiently accessing funds for these acquisitions, our team is well-versed in managing Business Finance - Commercial Loan Options. Our dedicated consultants are primed to seamlessly oversee the entirety of the finance process on your behalf. Be sure to take note of the impending deadlines and take proactive steps to capitalize on this opportunity without delay.
Contact Jade Truck Loans on 1300 000 003 for a Chattel Mortgage Truck Finance quote to utilise temporary full expensing.
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.