Coronavirus Stimulus: Equipment Instant Asset Write-Off

The coronavirus pandemic has had a significant impact on Australian businesses with some experiencing severe hardship while others are pivoting, preparing and planning for the new normal and towards a post-COVID-19 economy. Businesses are looking for opportunities both to remain viable in these uncertain times and retain their workforce.

To take advantage of these opportunities and/or adapt to changing demand, many businesses are looking to investment in new equipment.

Instant Asset Write Off: Explainer

• To support business investment, the Federal Government announced an increase in instant asset write-off (IAWO) from $30,000 to $150,000 to 30 June 2021 for businesses with aggregated annual turnover of $500 million at 30 June 2020.
• This is a 15 month time limited incentive.
• IAWO applies to new assets depreciable under Division 40 of the Taxation Act
• Equipment must be utilised or installed for use by 30 June 2021.
• IAWO applies per asset so multiple items of equipment may be purchased under this measure.
• For full details please refer to the Australian Government fact sheet
• Please refer to your accountant for specific advise on your individual business circumstances.

Choice of Equipment Finance

To support business to take advantage of this IAWO measure, Jade Equipment Finance is providing continuity of service to ensure finance for equipment finance applications are processed swiftly and at our cheap interest rate policy.

Issues to consider include:

• The type of finance facility selected requires consideration in regard to taking advantage of the IAWO.
• Equipment Leasing and Equipment Rental are off-balance loan products. The equipment appears as an asset/liability on the lender’s balance sheet, not the borrower’s. Therefore IAWO may not be claimable.
• Commercial Hire Purchase and Chattel Equipment Mortgage are on-balance sheet finance and as such suited to IAWO.
• Choosing which finance type is best suited to the accounting method implemented by your business is best done in discussion with your accountant.

Opportunities to Seek Out

The coronavirus pandemic has without doubt, started as a health crisis and quickly morphed into a global economic crisis. While the big economic picture may be extremely alarming, individual businesses may take some comfort by viewing the situation from their own ‘small frame’ perspective.

From the individual perspective there are numerous examples of businesses pivoting their operations and of prospects for growth into new areas into the future which may require the purchase of equipment or business equipment loans.

We quote a few examples:-

• For some business owners who have seen the market for their products and services significantly reduced or disappear, they are pivoting to use their existing skills and equipment to producing goods that are in demand. Examples include a staging company that pivoted to producing desks to cater for the surge in work from home requirements and gin and other spirit manufacturers pivoting to produce sanitiser.
• Many companies have moved to assist health authorities by adapting their resources to produce and finance medical equipment including ventilators, masks and personal protective equipment (PPE).
• Research, development, testing and trials into finding a COVID-19 vaccine and possible treatments have been accelerated and fast-tracked which is opening opportunities in pharma and medical fields.
• A wide range of companies who have been forced to close their bricks-and-mortar stores or are seeing a significant decrease in trade, have expanded their online and delivery services. This is requiring companies to invest in transportation such as trucks, delivery vehicles, along with additional warehousing/storage facilities and software systems to process orders. Jade can provide finance for all these types of equipment.
• The increase numbers of people transitioning to work from home has seen a surge in demand for products required to set up a home office which have necessitated companies in that sector to increase production.
• The COVID-19 pandemic has created delays and issues in procuring some goods from overseas manufacturers. In particular PPE but also many other items. These issues have put the spotlight on Australia’s domestic manufacturing capabilities. Capabilities which have significantly reduced over recent decades in preference for cheaper overseas options. Both Governments and industry are now looking closely at local manufacturing capabilities to better protect supply lines of essential goods. This may represent opportunities for many businesses to expand and grow.
• Many food and household goods producers have seen a surge in demand as consumers have panic-bought key items. This has forced a quick scale-up by companies in production by purchasing and financing manufacturing to meet that demand.
• Some businesses have had to focus on different markets and invest in equipment to facilitate this shift. For example, food producers that have seen their supply to restaurants and catering industry decline have had to shift to directly supplying consumers which has seen investment in delivery systems and vehicles.
• The stay at home restrictions have seen a surge in demand for DIY hardware and home improvement products. Businesses in this space have had to scale-up to cope and with some experts predicting that many of the current movement and distancing regulations will be in place for some time, this may be a longer term trend.

Pivoting. Preparing. Producing

As Hon Dan Tehan, Minister for Education said in a press conference on 12 April, if you’re given lemons you make lemonade. It’s an old adage but in classic Australian spirit, businesses are making what they can of a bad situation. The IAWO measure will benefit many businesses and Jade is committed to supporting businesses to facilitate their equipment finance requirements.

To discuss the options for your equipment finance loan requirements contact us on 1300 000 003 to speak with a Jade Equipment Finance consultant.

DISCLAIMER: THE INFORMATION PROVIDED IS FOR GENERAL CONSIDERATION. ANY REFERENCE TO OFFICIAL GOVERNMENT POLICIES HAS BEEN SOURCED FROM AUSTRALIAN GOVERNMENT AND STATE GOVERNMENT SOURCES. NO LIABILITY IS ACCEPTED FOR ANY ERRORS IN THE PRESENTATION OR INTERPRETATION OF THE FACTS AS PROVIDED BY THESE SOURCES. WE ADVISE ALL INDIVIDUALS AND BUSINESSES TO REFER TO THEIR ACCOUNTANT OR FINANCIAL ADVISOR FOR PROFESSIONAL ADVICE SPECIFIC TO THEIR INDIVIDUAL CIRCUMSTANCES.