Every year, June 1 ushers in the commencement of the end of the financial year (EOFY) sales season. These tax-time sales offer advantages for sellers by reducing their stock levels before the 30th of June, and for buyers, they provide an opportunity to procure potentially tax-deductible items to claim in the ongoing financial year. However, the 2021 EOFY arrives with added allure in terms of tax benefits, thanks to the initiatives from the Federal Budget.
For businesses, this juncture could be the perfect opportunity to amplify the tax advantages associated with acquiring a new truck, especially when coupled with the appropriate loan product. Like a refreshing downpour following an extended dry spell, it might signify an optimal convergence, allowing you to gain more value from your investment. This could translate to even greater deductions that aid your business's financial bottom line.
EOFY Truck Discounts
The evident cost advantage linked to purchasing a new truck in June or even July is the customary discounts extended by truck manufacturers and dealers. Although many are yet to unveil their exact offers, these discounts usually entail substantial reductions, often amounting to thousands off the listed price.
One offer to be wary of is in regard to finance offers made by non-finance companies. We’re talking dealers and manufacturers. Dealer or manufacturer finance offers may sound appealing but checking the specific details and getting a quote from us with cheap truck loan deals to compare is strongly advised. Some offers of this nature may promote a ridiculously low-interest rate. But on closer inspection, in the fine print, it is revealed that this rate is only for a limited time of the entire loan term, often as short as 6-9 months. In terms of a 7-year truck loan that’s a very small time frame. After the promotional period, the interest rate can revert to a much higher level.
When sourcing truck loans, at least give Jade a quick call for a quote or just use our truck finance interest rate comparison table for rough repayment estimates. Any discount on a truck price might quickly evaporate with an over-priced finance deal.
Chattel Mortgage Truck Loan Tax Benefits
To fully capitalize on the current available tax advantages from asset acquisitions, buyers must secure their truck with the suitable loan product. To optimize benefits from Instant Asset Write-Off (IAWO) and temporary full expensing, the most fitting choice is Chattel Mortgage.
Some banks refer to Chattel Mortgage as a Heavy Vehicle Loan. This finance arrangement is remarkably versatile and suits numerous businesses that adhere to the cash method of accounting. Apart from the tax benefits tied to Chattel Mortgage and accelerated asset depreciation initiatives, this financing avenue offers another noteworthy advantage.
Under Chattel Mortgage, the complete Goods and Services Tax (GST) applicable to the purchase price can be claimed in the same BAS (Business Activity Statement) period as the purchase. In other words, the entire GST amount can be asserted in the subsequent BAS statement. Consequently, if you are obligated to pay a substantial GST amount, the GST linked to your truck acquisition could substantially diminish your liability and the amount you are required to arrange and pay by the 28th of July.
As all the GST is claimed upfront so to speak, no GST then applies on the loan repayments. Another benefit of Chattel Mortgage is that it attracts the lowest interest rate across the asset acquisition finance options.
Click here for more information on time limits on GST credits.
Accelerated Asset Depreciation Schemes
Pending adherence to the eligibility criteria set by the ATO, businesses engaging in a Chattel Mortgage finance arrangement for purchasing a new truck can unlock substantial tax deductions through the mechanism of temporary full expensing, also known as Instant Asset Write-Off. While the core concept remains consistent between the two, temporary full expensing (TFE) encompasses a broader spectrum of businesses and assets of higher value.
Under these frameworks, businesses have the opportunity to claim the entire cost of the depreciable asset as a tax deduction in the same year of its purchase. Consequently, this elevates the tax benefits associated with the acquisition even further. Ordinarily, with Chattel Mortgage, the truck's depreciation would occur incrementally over an extended duration. However, the option to depreciate or deduct the full amount within a single year translates to a substantial tax deduction of significant magnitude.
Temporary full expensing has been extended through to 30 June 2023 but, take note, in order to be eligible the asset (truck) must be operational in the business in the financial year claimed. So if you want to make the most of this tax cut turbocharging combination in this financial year, the clock is ticking.
Make a Loss, Receive a Gain
The concluding element of our effort to amplify benefits is the concept of Loss Carry Back. While we've explored this concept across multiple articles, its potential advantages render it deserving of repeated emphasis. This budgetary provision enables qualifying businesses to carry back losses incurred in specific years, including the 20/21 period, and apply these losses to offset profits generated in designated prior years.
To illustrate, if the tax deduction secured through temporary full expensing leads to a loss for the business, this loss can be employed to offset profits from earlier years. The pertinent tax paid during the profitable year is effectively reimbursed to the business in the form of cash. Thus, a scenario emerges wherein a loss culminates in a cash refund.
EOFY and Truck Loans: Summing it All Up
So EOFY 2021 is no ordinary year. With the assistance of a low rate truck Chattel Mortgage through Jade, your business can potentially turbocharge the tax deductions realised through a new truck purchase.
- Get the EOFY discount from the dealer
- Chattel Mortgage for trucks
- Claim the GST on the purchase price
- Realise the tax deduction of temporary full expensing
- Receive cash tax refund through loss carryback
To get started on the process, just contact us to talk finance while you start scouting the truck market for a great price.
Contact 1300 000 003 for a lending quote today.
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.
