Throughout the past 15 months or so, the entirety of the finance lending industry, coupled with numerous truck dealers and manufacturers, has been actively advocating the tax advantages presented by the Instant Asset Write-Off and temporary full expensing initiatives for prospective new truck purchasers. These initiatives, which involve accelerated asset depreciation, were introduced by the Federal Treasurer, Josh Frydenberg, as a means to invigorate the economy in response to the impact of COVID-19. Read more here.
These initiatives have been vigorously promoted to incentivize operators to make investments in new trucks, and indeed, they present substantial tax advantages to the purchasing businesses. The primary advantage lies in the capability to depreciate the entire purchase price, which in certain instances may amount to $150,000 or even more, within the same fiscal year the truck was acquired. In contrast, the conventional scenario entails a significantly smaller portion of the purchase price or truck value being depreciated annually over an extended duration. Typically, it would take several years to realize the tax benefit through depreciation.
But the drawback for many business operators has been the finance products suitable to realise the advantages of these accelerated depreciation measures. Chattel Mortgage truck & trailer financing is widely seen as the appropriate truck loan type for businesses that want to utilise these depreciation measures. With this form of loan, the asset is depreciated.
Nonetheless, it's worth noting that Chattel Mortgage might not align with the financial and operational objectives of every business. This is due to the fact that Chattel Mortgage involves incorporating the asset—i.e., the truck's value—into the company's accounts as an asset and liability. However, this particular arrangement might not align with the preferences of every business when it comes to their company balance sheet.
Another crucial aspect pertains to the accounting methods utilized by businesses. Chattel Mortgage is ideally suited for businesses that employ the cash method of accounting. Conversely, many businesses opt for the accruals method, which is not as well-matched with the structure of Chattel Mortgage.
For businesses seeking an alternative to buying a truck with Chattel Mortgage to use temporary full expensing, We offer cheap interest truck loan products in Australia which also offer tax deductions.
Truck Loan Products
Let’s take Chattel Mortgage out of the picture for now and focus on two of the other very widely used types of truck loans we offer:
- Truck Leasing
- Truck Rent-to-Own or Rental
Both of these loan types are characterized as 'off-balance sheet' financing arrangements due to the fact that the asset—namely, the truck—is excluded from appearing on the borrower's balance sheet. By opting for these loan types and circumventing the inclusion of an asset/liability on the balance sheet, this approach is often labelled as 'enhancing the balance sheet's presentation.' This can potentially fortify the perception of the business's financial standing.
The balance sheet consideration circles back to the entity that holds the ownership title of the truck throughout the finance term. In the case of Chattel Mortgage, ownership title rests with the borrower, whereas with Leasing and Rental arrangements, it rests with the lender.
Nevertheless, in both instances, the borrower assumes full ownership of the truck from the outset and bears responsibility for all ongoing expenditures, including registration, insurance, servicing, repairs, and maintenance. Thus, from an operational perspective, the situation is comparable for both loan types.
Also on a level playing field are some of the loan elements:
- All are priced at our Jade cheap interest rates.
- All have a fixed interest rate which is not subject to change over the course of the loan.
- All have a fixed finance term and a fixed amount of monthly payments.
- All allow for a residual or balloon amount to reduce monthly commitments.
- All can be acquired on a no deposit finance basis.
- All can be utilised for low doc, no doc truck loans and bad credit
And all deals are personally sourced, quoted, structured and negotiated by a Jade consultant in the best interests of our customer. To get a better idea of your finance options, use our truck loan interest rates comparison tool.
Leasing and Rental Tax Deductions
Leasing and Truck Rental arrangements also extend tax benefits. In both of these loan types, the monthly lease or rental payment is categorized as an operational expense for the business. Consequently, the entire repayment sum qualifies as a tax-deductible item.
In essence, this implies that your business accrues a tax deduction equivalent to 12 times the repayment amount annually.
GST is applicable to the monthly payment (not the interest portion) and for businesses registered for GST that can be claimed on the appropriate BAS return.
Considering the Entire Loan Package
When determining the most suitable truck financing option for an individual business, it's imperative to evaluate the complete array of features and benefits in relation to their pertinence to that specific business. Every operator will harbor distinct goals and objectives for their business, and the diverse loan types are structured to accommodate this breadth of diversity across the business landscape.
Your Jade consultant will collaborate closely with you to achieve the optimal outcome tailored to your business. However, we strongly advocate seeking input from your accountant with regard to selecting the appropriate loan type. Irrespective of your business's industry or sector, as well as its financial aspirations, we are well-equipped to facilitate cost-effective and tax-efficient truck financing solutions with competitive interest rates.
Contact 1300 000 003 for a quote on a tax-effective lending to suit your business objectives.
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.