Glenn owns and runs a transport company. He has been offered regular work and requires an additional trailer. He plans to purchase a 45ft Tri Axle Flat Top worth $70,000 before Government and other associated charges. The Dealer will deliver the trailer for Glenn ready to use this year.
After speaking with his Accountant, Glenn has confirmed his business is eligible for an
Instant Asset Write-off on the trailer purchase because:
- Annual turnover for the business is less than $500 million
- Cost of the trailer is below the $150,000 threshold (previously $30,000)
- Sufficient profit has been made to take advantage of the instant asset write off
and reduce the income tax payable for the 2020 financial year.
Rather than take cash out of the business Glenn has decided to use AddCash to finance the trailer purchase. AddCash will finance 100% of the purchase value and associated costs reducing the requirement for an upfront cash contribution. 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. Glenn can also retain the benefit of any GST refund or credit when he lodges his Business Activity Statement for the June quarter.
The benefit of the Instant Asset write off will offset the associated finance costs in the first year. Glenn’s business is registered for GST and the lower company tax rate of 27.5% applies.
Customer Invoice Finance component
Annual turnover for Glenn’s business is $2.8 million. There are 20 regular active Customers who on average pay 42 days from invoice date. Amounts owing from Customers range from a few thousand dollars up to $37,000 and the total owing from all Customers is $322,000. 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 | $80,080 divided by $322,000 = 25%).
Glenn has Nominated 4 Customers for Customer Invoice Finance who consistently have a total balance owing that does not fall below $104,000. 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 of 80% (ratio of Asset Finance to Total owing from Nominated Customers | $80,080 divided by $104,000 = 77%).
Glenn has the trailer he needs to do the job, taking full advantage of the Instant Asset Write Off stimulus while responsibly managing his Business cashflow.