If you’re looking for a new asset for your business then there has never been a better time to buy. The instant asset write off is a great incentive for businesses to buy equipment or vehicles now along with some record low interest rates.
The commercial finance brokers at CarBeagle can assist you with getting a quote on finance for all your equipment’s needs and can help you navigate the instant asset write off and how it can work for your business.
The below example is a simple explanation on how it could work for your business and you should always speak to your accountant for any tax advice.
Example 1 – Jim & ABC Builders Pty Ltd
Jim the owner of ABC Builders Pty Ltd is considering taking advantage of the Governments short term lift in the Instant Asset Write off value, and wants to buy a new Landcruiser Dual Cab Ute for work which costs $84,990. He uses the Ute for 85% business use, the Ute has a 1 tonne payload capability and is used to carry tools and equipment for his business.
Here’s how it looks for Jim to buy the new Ute and receive the immediate benefits of the IAWO.
| ABC Builders Pty Ltd | Taxable Revenue | Asset Write off value | Tax Payable | Available Cash Flow |
| Without IAWO | $125,000 | $0.00 | $34,375 | $90,625 |
| With IAWO | $125,000 | $72,241 | $14,508 | $110,492 |
| Difference | + $19,867 |
*This is based on 85% of the asset being written off in line with the business use amount, and based off the company tax rate of 27.5%
How does finance help with this situation?
Whilst ABC Builders Pty Ltd needs the vehicle, and wants to take advantage of the instant asset write-off, Jim doesn’t want this to effect his businesses cashflow at the moment. By financing the vehicle Jim is able to maintain sufficient working capital within the business to meet all his commitments.
Using the above example, Jim has chosen to finance the new vehicle over 4 years with a 40% balloon at $315 per week (*3.97% p.a). The total payments over a 52 week year amount to $16,380 p.a.
Example 1 – Paying Cash
$125,000 taxable income – $72,241 (purchase cost of vehicle) – $14,508 tax payable = $38,251 working capital available.
Example 2 – Financing vehicle.
$125,000 taxable income – $16,380 (vehicle finance repayments) – $14,508 tax payable = $94,112 working capital available.
This means Jim is able to increase his available working capital by $55,861 by electing to finance the new vehicle.
**Further deductions for expenses may be available on the interest and running cost of the assets. This example provided is general in nature and therefore should be viewed as general advice.
FinanceBeagle has a team of expert commercial finance brokers who can help you take advantage of this offer and secure the best rate possible on all types of equipment for your business. Get in contact with us for an obligation free chat to see how we can help your business.
For more information on the Instant Asset Write Off read our blog The 2020 Guide to the Instant Asset Write Off or check the Governments ATO Website for specific business eligibility information.
