Take advantage of the instant asset write-off scheme

With the end of the financial year fast approaching, getting your finances in shape will be top of mind for many busy practitioners. Having worked closely with medical professionals for over 25 years, BOQ Specialist understand that managing your finances, while continuing to run your practice and care for patients can be a difficult task. To help make the lead up to 30 June as smooth as possible, they have identified some key ways to turn these challenges into opportunities. 

“If you’re a small and medium sized business owner, June is the perfect time to examine your equipment needs”, says Nicole Mortimer, Head of Commercial Products at BOQ Specialist. “This is not only to ensure that your business retains a competitive edge and continues to grow, but so you can make the most of the current tax deductions available to you.


Tax benefits
 

Now is the time to take advantage of the recently increased $30,000 instant asset write off. “Small and medium business owners can now write off eligible assets up to $30,000 each before the end of the financial year”, says Mortimer. “This means that if you’re a medical specialist with a turnover of less than $50 million and you purchase an asset that is used for business purposes, you can claim it as an immediate tax deduction.” 

This measure could improve the cash flow of your business, providing a lift in activity and investment for the new financial year. “This tax advantage is a simple and efficient way to boost the health of your business”, says Mortimer, “so it is important to investigate whether your assets are eligible for the deduction before 30 June”. Interestingly, equipment suppliers tend to become more flexible at this time of the year. “The tax break combined with the lower cost options minimises the impact on cash outflows”, says Mortimer.

More good news is that the government extended the popular tax concession for another year. “We were expecting medical practitioners to be under pressure to take advantage of the $30,000 instant write-off but now that it’s been extended to 30 June 2020, it creates a bit of relaxation for everyone”, says Mortimer. “Keep in mind that from 1 July 2020, the threshold will revert to just $1 000 but for now the continuation of this tax break is a positive outcome for small and medium business owners.”


Equipment finance
 

Of course, you’ll need money to pay for any new equipment before you can claim a tax deduction. There are a number of different ways to finance new equipment. The right one for you depends on the stage of your career, the type of practice you have, and how you currently structure your finances. 

A chattel mortgage has become quite a popular choice when it comes to purchasing equipment according to Mortimer. 

With this loan type, you take legal ownership of the equipment from the time of purchase for tax purposes but your financier has a ‘mortgage’ over it until the loan is repaid in full over an agreed contract period. You may be able to claim the tax deduction for the usage of the asset.  If GST applies to the purchase of the equipment, you may also be able to claim an input tax credit for the GST on the purchase price. “This can help you to better manage your cash flow and tax budgetary requirements,” says Mortimer, “but make sure you talk to your financial adviser or accountant about what is best for your individual situation.”

Under a lease agreement, your financier owns and rents the equipment to you, and your payments are split into a number of monthly lease payments and a residual. While you have the right to use the equipment for the period of the lease, you won’t have legal ownership until the residual is paid. You will also be responsible for the running costs and residual risk of the equipment. “With a lease agreement, the full monthly payments are generally tax deductible which may help you to dispose of the asset “hassle free” at the end of the lease period”, explains Mortimer. “You may also be able to take on new technology without taking the risk on the resale value.”


Interest prepayments
 

Whether you’ve got a chattel mortgage that you’re paying back, or some other kind of commercial loan—for example, maybe you borrowed money to buy into or purchase a practice—now is the time to revisit any interest payments you might be making. “The idea is to prepay the interest on interest only fixed rate loans for the next 12 months and claim a tax deduction in the current financial year,” says Mortimer. “The maximum prepayment period is generally 12 months and the interest rate for this period has to be known in advance. The benefit of this is that you don’t have the “burden” of monthly repayments during the year.” 
 

If you're keen to take advantage of these generous tax concessions for small and medium businesses, talk to one of our finance specialists on 1300 131 141

 

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BOQ Specialist - a division of Bank of Queensland Limited ABN 32 009 656 740 AFSL and Australian credit licence no. 244616 (“BOQ Specialist”). The information contained in this article (Information) is general in nature and has been provided in good faith and has been prepared without taking account of your objectives, financial situation or needs. Whilst all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, BOQ Specialist make no representations or warranties. BOQ Specialist recommends that you obtain independent financial and tax advice before making any decisions.