The Federal Treasurer, Josh Frydenberg, will bring down the 2021/22 Federal Budget on Tuesday 11 May. The budget is expected to set the Government’s policy and course for the next stage of the pandemic recovery and will be highly anticipated by both individuals and business owners.
While the 2020/21 was described at the time as the most significant budget in our time as it addressed the pandemic stimulus, in many ways, the 2021/22 is even more significant. The 2020/21 budget was delayed from the usual May announcement to October so the Government had a better idea of what was required to support and stimulate the economy as a result of the coronavirus pandemic. Reflecting back to October 2020 and in some ways, we thought we knew what we were dealing with. While Melbourne was emerging from a second and quite brutal 112 day second lockdown, the vaccine was on the horizon and other regions were seeing positive signs of recovery.
Now, several months on, and the reality has changed with many aspects seemingly a lot less clear-cut than originally thought. Sydney’s northern beaches outbreak caused shockwaves, state borders were opened and closed on rotation and the vaccine rollout has been impacted with several setbacks and recalibrations. While consumer confidence is high, the economy has posted several quarters of GDP growth and unemployment figures have exceed forecasts, there is still a sense of apprehension. Click to read more.
The budget needs to set the path to recovery while maintaining flexibility to quickly adapt to changing scenarios. Businesses also need to be prepared for the unexpected. Ready to adapt to grasp opportunities as they present and have the flexibility to modify plans when obstacles present.
Several key sectors are still feeling the serious impacts of international border closures and with the ongoing issues with the vaccine rollout, there is a sense of uncertainty. Sectors such as tourism have been calling for industry-targeted packages of support.
Proposed changes to superannuation have been a hot topic in Parliament in recent times and will be closely watched. Any increase to the current superannuation level of 9.5% may mean an increase in outgoings for business.
But there is a lot to be grateful for in the Australian economy compared with many other countries. While awaiting what the Treasurer has in store for us in the year ahead, we remind our customers of some of the positive measures which you can still take advantage of from the 2020/21 budget.
2020-2021 Measures Still Available
Key initiatives from the Federal Budget 2020/21 are still on the table and could represent significant benefits to your business. Instant Asset Write-off and temporary full expensing are two major initiatives that have been of greatest interest to our Jade Truck Loans customers. The opportunity for eligible businesses to write off the full purchase price of eligible trucks in this financial year rather than depreciate the asset over time under the usual tax rulings. For some businesses, these measures continue through to 30 June 2022.
While IAWO has been covered extensively and exhaustively, one initiative which hasn’t received quite as much coverage is Loss Carry Back. This is more complicated to get your head around but is also relevant to asset acquisitions, such as purchase of a new truck.
By taking advantage of Loss Carry Back, eligible businesses could receive a cash refund on tax paid in earlier years. We’ve covered this in earlier articles but provide a quick recap as the EOFY is approaching and you may want to act now with that truck purchase to realise the benefit in 2020/21.
Eligible businesses that show a loss in financial years 19/20, 20/21 and 21/22 but made a profit in 18/19, 19/20 or 20/21 can claim losses back rather than carrying them forward. By carrying losses back, businesses may be entitled to a cash refund of tax paid on the earlier profit. Stressing, the refund payable as a refund, not as an accounting entry to be posted against future returns.
This measure was introduced to support eligible businesses with a cash stimulus as a result of the negative impacts of the pandemic. So how does this link with the purchase of a new truck? Stay with us here, we explain.
If an eligible business purchases an eligible truck asset under the appropriate finance product they could claim the IAWO or temporary full expensing. By claiming this tax deduction it may result in the business claiming a loss in that financial year. That loss could be claimed against profits made in the relevant years and hence a refund could be realised.
Realising Loss Carry Back
The key to this scenario is purchasing the truck with the appropriate loan product. A loan product where the asset can be depreciated. We see Truck Chattel Mortgage as the most appropriate finance product for this purpose.
With Chattel Mortgage, the full amount of loan repayments is not tax deductible, only the interest portion is. The main tax benefit is realised through the depreciation of the truck as an asset. Another drawcard of this form of finance is that it attracts our lowest interest rate compared with leasing and rent to own. Use our truck loan interest rates to compare across lenders on Chattel Mortgage for the truck you’re interested in purchasing and to rekindle those purchase plans.
This loss carry back is already legislated for this coming financial year but we await what other initiatives may be introduced by the Treasurer on 11 May.
Contact 1300 000 003 to discuss moving forward with your vehicle purchase plans.
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