We are currently living in strange and uncertain times. From the pressures on doctors on the front line, to the strain on the healthcare system and its supply chain and of course your own personal health, we recognise the impact that COVID-19 is having on the medical community is onerous and significant. For some, this is compounded by the devastating bushfires that swept the country earlier this year leading to a challenging start to 2020.
It is at times like these that you may ask yourself what your approach to investing in new equipment should be. Reviewing your current business plans and strategies should be top of mind. If upgrading or purchasing new technology and equipment fits within those plans then you should still consider the investment and ensuring you have access to capital for the purchase is key. Thanks to recent changes to the Government stimulus package, you can also upgrade technology, support long-term growth in your practice and reduce your taxable income.
Government stimulus package to support business investment
The Government announced its goal to deliver support for business investment as part of its economic plan. This included a fivefold increase to the instant asset write-off threshold from $30,000 to $150,000 for eligible assets. All eligible assets includes new or second-hand assets first used or installed ready for use from 12 March 2020 until 31 December 2020. Initially this incentive was set to end on 30 June 2020 but the Government granted a further six month extension.
In a nutshell, it means owners can deduct the total amount of eligible purchases up to that $150,000 threshold from their tax total during the financial year the items were bought. It can also be used by businesses multiple times.
Further, for eligible assets that exceed $150,000 acquired from now to 30 June 2021, you can now take advantage of accelerated depreciation with 50 per cent upfront and the balance over the typical depreciating useful life of the asset. Generally, tax deductions only apply at your marginal tax rate so in uncertain environments it’s critical to discuss your cash flow with your specialist advisor if you’re looking to take advantage of this.
Equip yourself and your practice for success
Reviewing the needs of your practice is vital in ensuring your practice runs smoothly and efficiently, especially in times like this where there’s so much uncertainty. The equipment a medical practice needs to perform efficiently may vary based on your specialty and technological advancements or size and scope of the practice.
To take advantage of the instant asset write-off, here’s what you should do:
- Any item under $150,000 or less (GST exclusive) is eligible for immediate write off if the goods are installed and ready for use
- Goods can be new or second hand
- You can make numerous claims across many tax invoices or with multiple items on the one invoice. It’s not a one-time only offer, just so long as each purchase meets the above criteria
- The goods must be financed under a specific loan type, not all facilities are appropriate.
Anyone fitting the eligible criteria should be seriously considering their options when it comes to buying assets used within their business, such as:
- Medical equipment, dental chairs, optometric equipment. The list is endless!
- IT Equipment, including servers, computer and phone hardware along with scanners, copiers etc
- Practice furniture and fit out, including new furnishings, kitchens, chairs, white goods etc
- All work vehicles.
What financing is available?
A common misconception is that you can only get the instant write off if you pay for the goods. This is not true, you can borrow the funds and still receive the benefit. Interestingly, often the interest on a loan over say three years will be similar to the interest you can earn on the equivalent cash in the bank.
Facilities such as a chattel mortgage, lease and rental provide a range of financing options that can be tailored to best suit the needs of the business. Strategies that can be considered include:
- Matching loan terms to the working life of the asset.
- Structuring payments to match cash flow including seasonal considerations.
- Acquiring an asset to be used for a specific work contract with options at the end of the contract to buy or hand the asset back.
- Having the flexibility to upgrade an asset when yours needs a change.
As always, it’s best to speak with your financial advisors/ accountants about specific advice for your own situation, and the team at Credabl are always here to support your plans with bespoke funding solutions.
Contact the Credabl team today to find out about your equipment and technology finance options.
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This article is a guide only and does not constitute any recommendation on behalf of Credabl Pty Ltd (ACN 615 968 100) or any of its related bodies corporate (Credabl). The information in this article is general in nature and we have not taken into account your personal objectives or financial circumstances or needs when preparing it. Before acting on this information you should consider if it is suitable for your personal circumstances. Credabl is not offering financial, tax or legal advice. You should obtain independent financial, tax and legal advice as appropriate.