Newsletter Articles

END OF YEAR RUN-OUT SALE!!

This month's guest writer accountant Matthew Snelleksz gives us some end of Financial Year tips on acquiring vehicles and equipment for your business.

How many times do you hear that on the TV at this time of year? The financial year end is only weeks away. Big business is doing it’s best to meet budgets by getting those last minute sales. This generally means that June is the best time for purchasers to grab a good deal.

So now is potentially a good time to upgrade cars and major equipment. But what is the best way to do this and maximize your tax deduction?
• Buy outright?
• Borrow?
• Lease?

Buy outright: You have access to depreciation deductions. However, this close to year end, this amount is minimal. At best a small business (generally one with less than $2 million turnover) can get a deduction of 15% of the cost if the asset is pooled. This drops to only 2.5% if the asset is expected to last for 25 years or more.

Borrow: Again you have access to depreciation deductions – the same as if buying outright. You also have access to interest deductions. However, being close to year end, again, the amount of interest deduction is minimal.

Lease: There are more possibilities here. Every dollar paid towards the lease of business assets is a deduction. In addition, a small business can prepay up to 12 months of lease payments. The amount paid is fully deductible this year. Prepaying may also mean you can secure a better interest rate.

What if you have already purchased equipment outright recently? There is still the ability to increase your deductions. Consider selling the asset to a finance company and lease it back. This will allow you to prepay the lease, thereby increasing your tax deduction. It will also free up funds to invest back into growing your business.

Matthew Snellecksz
Snelleksz & Co

Phone: +61 (07) 3422 1022
Fax: +61 (07) 3422 1002
Email: snelleksz@ozemail.com.au