Accelerated Depreciation

Peter’s business operates a fleet of Tipper Trucks many of which are regularly working on a national highway upgrade as part of the Federal Governments Infrastructure stimulus spending. He has decided to purchase a new 2020 Iveco Stralis AT500 6×4 Hardox Custom Tipper for $250,000 before Government and other associated charges.

The new Iveco Tipper is ready to use before 30 June 2021 and Peter’s Accountant has confirmed his business is eligible to apply an Accelerated Depreciation rate of 57.5% (rather than 15%) equating to an allowable deduction of $143,750 against his assessable income for the year because:

• Annual turnover is less than $10 million.
• Simplified depreciation rules are used by the business.
• The Tipper is eligible to be added to the General Small Business Asset Pool.
• Sufficient profit has been made to take advantage of the Accelerated Depreciation rate
  and reduce the income tax payable for the 2020 financial year.

Rather than take cash out of the business Peter has decided to use AddCash to finance the Tipper Truck purchase.  AddCash will finance 100% of the purchase value including any dealer delivery, stamp duty, registration, insurance and any other options, improvements or accessories either factory or dealer fitted totalling $250,000 plus applicable GST of $25,000. The total amount of finance including the establishment fee of $8,250 is $283,250.

He intends to spread repayments over five years with a final balloon to lower the regular ongoing repayments and minimise the impact to his ongoing cashflow.  Peter can also retain the benefit of any GST refund or credit when he lodges his Business Activity Statement for the next quarter.

The benefit of the Accelerated Depreciation deduction will offset the associated finance costs in the first year. The GST refund/credit will further reduce the cash Peter needs to cover his finance costs in the first year. Peter’s business is registered for GST and the lower company tax rate of 27.5% applies.

Customer Invoice Finance component

Annual turnover for Peter’s business is $8 million. There are 15 regular active Customers who on average pay 55 days from invoice date. Amounts owing from Customers range from $10,000 up to $300,000 and the total owing from all Customers is $1,200,000. The business satisfies the AddCash requirements of a minimum of 5 Customers and maximum LVR of 30% (ratio of Asset Finance to Total owing from Customers | $283,250 divided by $1,200,000 = 24%).

Peter has Nominated 2 Customers for Customer Invoice Finance who consistently have a total balance owing that does not fall below $375,000. He continues to deal with them as normal but instructs them to pay directly into his Business’s bank account held with AddCash. This satisfies the minimum Nominated Customer LVR (ratio of Asset Finance to Total owing from Nominated Customers | $283,250 divided by $375,000 = 76%).

Peter has a new Tipper, is taking full advantage of the Small Business Accelerated Depreciation stimulus while responsibly managing his Business cashflow.

Paul has a concrete pumping business. He has decided to purchase a new 2020 Flowcrete Concrete Pump for $600,000 before Government and other associated charges.

The new Concrete Pump will be ready to use this year and Paul’s Accountant has confirmed under the new Accelerated Depreciation method an allowable deduction of $390,000 can be made against his assessable income for the 2020-21 income year. The calculation being half the Pump’s value immediately deducted $300,000 plus 30% of the remaining half $300,000 x 30% another $90,000. All up equivalent to 65% of the Pump’s value can be deducted in the first year. This is because:

• Annual turnover is less than $500 million
• The business does not use Simplified Depreciation rules
• Sufficient profit has been made to take advantage of the Accelerated Depreciation
  and reduce the income tax payable for the 2021 financial year.

Rather than take cash out of the business Paul has decided to use AddCash to finance the Concrete Pump.  AddCash will finance 100% including any dealer delivery, stamp duty, registration, insurance and any other options, improvements or accessories either factory or dealer fitted totalling $600,000 plus applicable GST of $60,000. The total amount of finance including the establishment fee of $19,800 is $679,800.

He intends to spread repayments over five years with a final balloon to lower the regular ongoing repayments and minimise the impact to his ongoing cashflow.  Paul can also retain the benefit of any GST refund or credit when he lodges his Business Activity Statement for the next quarter.

The benefit of the Accelerated Depreciation deduction will offset the associated finance costs in the first year. The GST refund/credit will further reduce the cash Paul needs to cover his finance costs in the first year. Paul’s business is registered for GST and the lower company tax rate of 27.5% applies.

Customer Invoice Finance component

Annual turnover for Paul’s business is $20 million. There are 20 regular active Customers who on average pay 46 days from invoice date. Amounts owing from Customers range from $17,000 up to $425,000 and the total owing from all Customers is $2,500,000. The business satisfies the AddCash requirements of a minimum of 5 Customers and maximum LVR of 30% (ratio of Asset Finance to Total owing from Customers | $679,800 divided by $2,500,000 = 27%).

Paul has Nominated 7 Customers for Customer Invoice Finance who consistently have a total balance owing that does not fall below $875,000. He continues to deal with them as normal but instructs them to pay directly into his Business’s bank account held with AddCash. This satisfies the minimum Nominated Customer LVR (ratio of Asset Finance to Total owing from Nominated Customers | $679,800 divided by $875,000 = 78%).

Paul has a new Concrete Pump, is taking full advantage of the Medium Size Business Accelerated Depreciation stimulus while responsibly managing his Business cashflow.