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Write Off

4 Jul 2019 11:14 AM -

The tax benefits of asset write offs 

End of Financial year is fast approaching and for those looking to purchase assets or equipment now is the prime time! The lead up to June 30 has many of our major vehicle suppliers wanting to close off their books on a financial high. This results in a competitive market and aggressive discounting across the board.

For our SME clients it's the time to think about maximising expenses and reducing taxable income, not to mention taking advantage of the ATO's accelerated depreciated provisions.

This incentive allows small businesses to claim an immediate deduction for business assets costing less than $30,000, acquired and installed ready for use between 7.30 pm (AEST) 12 May 2015 and June 30 2019. For more information about this incentive please see the website here.

The increase in consumers and business owners purchasing assets results in suppliers offering great discounts. This in turn means aggressive discounting from our Financiers.

To find out more about the government initiatives to support small business in Australia visit the ATO website.

So what should you do?

Results of a recent survey state that nearly two thirds of Australian Businesses are under-utilising the Government incentive. The top two reasons Australian small Businesses are not getting on board can be divided into two categories:

  1. Lack of working capital to purchase assets
  2. Lack of clarity around the initiative

As a finance broker , you are in a  powerful position to be able to conquer both of these areas. Below are 5 basic yet tangible action items you can incorporate into your process, as fast or slow as you feel comfortable with.

Do some homework. The amount of content available for you to reference in this space is phenomenal. You don’t need to be an expert on the subject matter but if you are going to raise the topic, be sure you know the basics. Some great places to gather information are:
Whilst educating yourself, share the knowledge. If you come across interesting articles you think would be beneficial/interesting for your clients, send it out. Australian small businesses fall into one of the most underserviced sectors in finance often falling between the cracks. They may not  have sought the expertise of a good accountant or financial advisor or can’t justify the expense. Many non-specialised bankers and brokers in the residential space don’t do this kind of finance. Don’t assume that your clients have someone to talk to about their business finance concerns. Some might ask you, some may not. But they don’t know what they don’t know.
So ask the question. I know, I know we have heard it all before but it’s that simple. Take the time to ask :
  • Do you have someone who assists you with your business finances; accountant, bookkeeper, financial advisor?
  • What, if any are the pain points that your Business has?
  • What made you start your own Business?
  • What is on the horizon?
  • Do you think you are taking advantage of the education/support and initiatives available to business clients?
  • Is cash flow a struggle?
  • Are your clients paying on time, what are the payment terms and how are payments made?
You can start to move into this asset finance space as reactively or proactively as you feel comfortable, some examples below of options you have available to you are listed below:
  • Connect with a specialist. If you want to be able to look after your clients without getting stuck with the details – Spot and Refer may be the option for you
  • Refer to a colleague
  • Connect with lender partners if you feel confident to write direct
  • Use your CRM tools to run reports and highlight your self employed clients. You can do targeted marketing or simply use social media channels to let your network know you can help in this space.
  • Get a mentor who will support you as you grow in this space.
Perfect your process. Work out what needs to happen for scenarios to go through to settlement and do your best to streamline the process. Get as much information at the initial meeting. Prepare your clients to start collecting supporting documents and ask lenders, industry specialists and colleagues for feedback.

THE SCENARIO

Broker contacted NLG Leasing because they had a client wanting to purchase a laser hair removal machine. Amount Required $19,000.
Factors to consider: Need the sale to go through before June 30. This was required for two reasons, Firstly, because she was purchasing the asset privately and the seller needed it to settle this financial year. Secondly, the client  wanted to see if she could take advantage of the Government incentive for asset write offs which at the time was $20,000.
The client had reached out to the broker as she only had two days to finalise the transaction before June 30. She had contacted several financiers on her own without success,. Either they accepted the asset or the time constraints, but not both.
The company, trading as a beauty clinic in Victoria,  had been looking at getting a machine for some time. Luckily, one became available.
She did not have last years financials completed and had just sold her property.
Her business had been trading for five years, was GST registered and was turning over roughly 900kp/a consistently for the last 3 years.We needed a low doc facility, written and settled in two days, for a specialised piece of equipment and a private sale to top it off.


THE SOLUTION:

Our NLG Leasing specialist had a look at available options and although we didn’t have a great deal of suitable lenders we were still able to present a few options to the client. They opted for an unsecured business loan with one of our lender partners.

THE BENEFITS:

  • Discount of $4000 from the seller as the purchase was made prior to June 30
  • Client was able to increase business sales because of the new equipment and the demand of this service
  • The client is also potentially eligible for the accelerated asset depreciation incentive so she was able to take the $19,000 off her total sales income making it possible to push her taxable income down to the lower tax bracket.
Great result for broker, client & NLG Leasing


THE SCENARIO:

Broker contacted NLG Leasing because they had a client wanting to purchase a new vehicle prior to end of financial year
The client was wanting a new Subaru Imprezza.
He had opted to take the finance through the dealership however he wasn’t able to proceed due to ATO arrears (under arrangement).
Car purchase price was $19,600 and ATO arrears were $30,000.
We could not get approval for the full ATO arrears, however we were able to use one of our unsecured business lenders to fund $20,000 of ATO debt. The client put up $10,000 and then we were able to beat the quote originally offered at the dealership and provide the finance to purchase the vehicle also.


THE SOLUTION:

We could not get approval for the full ATO arrears, however, we were able to use one of our unsecured business lenders to fund $20,000 of ATO debt. The client put up $10,000 and then we were able to beat the quote originally offered at the dealership and provide the finance to purchase the vehicle also.
Again, a great result for the client, broker and NLG Leasing.
 

Did you know?

If you are writing a home loan for a client and a previous vehicle loan is blowing out your ability to service, you can look at a rate review and possible extension over a longer loan term to reduce the repayments.
This allows you to offer a more competitive rate for your clients, potentially consolidate debt to tidy things up and get your home loan across the line.
 
For your commercial clients that would like to buy an investment property however, are struggling to raise the deposit.
If they have invested their own money into the business, you can look at doing at an unsecured loan to payback director contributions. They can then take their personal funds back out of the business to have them available for the investment property purchase.
*Examples are general in nature, always ensure you do a full review of your client's circumstances to see if what will work for them.
 
So even if you don’t want to stray far from your core business, a partnership with NLG Leasing can mean:

  • Additional income streams
  • Ringfencing your clients, don’t risk your clients seeking funding solutions elsewhere and potentially refinancing their homeloans too
  • Offer a more holistic financial solution  for your clients
  • Stay competitive
  • Grow your skill set

 
If I leave you with just one thing…Manage your clients expectations and don’t commit to rate until you have all of the client’s information. Let us help you provide time frames if you are not sure. Golden Rule – Under promise and over deliver! 

Happy to help.

Just a few tips to allow you to help your clients be on the lookout for untrustworthy dealerships. If you would like more assistance in this space, please contact the NLG Leasing team on 1300 722 011 or email support@nlgleasing.com.au