If you’re running a small business, now is the time to think big, whether you are looking at expanding via equipment leasing or purchasing new business equipment assets.
The Federal Government’s focus on small business in the May budget was designed to encourage small business growth through tax cuts as well as measures to reduce red tape, promote more start-ups and hire more employees.
Many business owners will be taking advantage of the opportunity to receive an immediate tax deduction on every asset they purchase valued up to $20,000. Cars, utes, tables, chairs, printers, photocopiers, tools, TVs, sound and security systems, computers, tablets and smartphones are just some of the assets that can be deducted until the end of June 2017.
Short on capital? Try equipment leasing
While these tax deductions are great news for many small business, what about those who don’t have the capital available to purchase assets?
If you are a small business in this situation, equipment leasing may be your ideal ‘think big’ solution. Rather than buying machinery, equipment or cars, a lease enables you to rent them for a manageable monthly payment. At the end of the lease term, you have the flexibility to return, upgrade or continue to rent.
Leasing enables you to enjoy instant access to the tools you need to grow your business, while at the same time freeing up cash flow. Given lease payments are fixed, you can plan cash flow around a known cost, enabling you to stay ‘cash flow positive’.
Australia’s record low interest rates have made leasing a viable option for any business looking to acquire an asset, whether it’s new kitchen equipment if you run a café, new tools if you’re a tradie or a new computer if you have a home office.
Leasing can be particularly useful if you need to update equipment but you’re not in a position to purchase, or your business relies on expensive equipment that goes out of date quickly.
There are also tax advantages to leasing. Under a leasing arrangement, the business does not own the equipment for tax purposes because the financier is the one who has bought the equipment and leased it to you. This means you do not have a depreciating asset on your books and do not need to pay GST on the purchase price of the equipment.
Lease repayments may be tax deductible and although GST is charged on these repayments, your tax agent or the Australian Taxation Office will be able to advise you of the possibility of claiming these via your company’s Business Activity Statement.
Want to know more about equipment leasing or Novated Leasing for motor vehicles? A mortgage broker can point you in the right direction.