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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 30 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.

Tax benefits

Now is the time to take advantage of the recently increased $150,000 instant asset write off. “Small and medium business owners can now write off eligible assets up to $150,000 each before 30 June 2021”, says Brandenburger. “This means that if you’re a medical or dental specialist with a turnover of less than $500 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 effective way to boost the health of your business”, says Brandenburger, “so it is important to investigate whether your assets are eligible for the deduction”. 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 Brandenburger.

Subject to any more action by the Government, it’s expected the instant asset write-off threshold will drop from $150,000 to $1000 (and will revert to small businesses with a turnover of up to $10 million) from 1 July 2021. 

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 Brandenburger. 

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 Brandenburger, “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 Brandenburger. “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 Brandenburger. “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, contact us or talk to one of our finance specialists on 1300 131 141. 

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  • Important Information

      The information contained in this webpage is general in nature and has been provided in good faith, without taking into account your personal circumstances. While all reasonable care has been taken to ensure that the information is accurate and opinions fair and reasonable, no warranties in this regard are provided. 

      The issuer and credit provider of these products and services is BOQ Specialist – a division of Bank of Queensland Limited ABN 32 009 656 740 AFSL and Australian credit licence no. 244616 (“BOQ Specialist”). Terms, conditions, fees, charges, eligibility and lending criteria apply. Any information is of a general nature only. We have not taken into account your objectives, financial situation, or needs when preparing it. Before acting on this information, you should consider if it is appropriate for your situation. BOQ Specialist is not offering financial, tax or legal advice. You should obtain independent financial, tax and legal advice as appropriate

      For more information on the instant asset write off scheme you should visit the Federal Government’s and Australian Tax Office’s websites. 

      Dates have been updated in this article and are current as at 26 October 2020.