Vehicle & Equipment Finance
Engage the services of reputable professionals like MGB Public Accountants to ensure everything is optimised and handled correctly.
Understanding Vehicle and Equipment Finance
Many businesses in Australia take advantage of equipment and vehicle finance as a valuable tool that allows them to acquire essential, often expensive assets without a debilitating upfront investment. Although their structure and applications are relatively straightforward, there are certain complexities, options, and tax planning considerations, especially when dealing with significant numbers. It is advisable to engage the services of reputable professionals like MGB Public Accountants to ensure everything is optimised and handled correctly.
Types of Vehicle & Equipment Finance Options
Typical vehicle and equipment finance options include:- Hire purchase In which the financial lender purchases the asset on the business’s behalf, and the company makes regular payments against the debt. Once the final payment is completed, asset ownership is transferred to the business.
- Chattel mortgage This option allows the business to immediately own the asset as the financial provider holds a mortgage until it is fully repaid.
- Finance lease The asset is purchased outright by the financial lender, who then leases it to the business. Comparable to a standard lease agreement, the company may be given the option to purchase the asset and take ownership at the end of the term or upgrade and start the process with a superior, newer model.
Benefits of Vehicle & Equipment Finance
- Optimised cash flow
- Flexibility
- Tax benefits
- Access to cutting-edge technology
By freeing up working capital, financing allows businesses to distribute funds elsewhere and operate smoothly.
When arranging vehicle and equipment finance, it is often possible to negotiate repayment terms that match the business’s existing and projected cash flow.
In Australia, financing repayments are often tax-deductible, helping to reduce the outflow of finances. Consult with MGB Public Accountants about our taxation services in Sydney to better understand the specific implications.
In circumstances where they would otherwise be unable to afford the latest technology, equipment, and vehicles, financing allows businesses to remain relevant by acquiring those items on their behalf.
Combined Vehicle & Equipment Finance Packages
These packages help businesses to acquire equipment and vehicles under a single financing agreement. This simplifies the process and can be a cost-effective, flexible, and beneficial way to proceed.Get in Touch with MGB Public Accountants
When you need assistance with financial concerns from BAS accounting to small business tax accounting, MGB Public Accountants are the experienced, skilled professionals you need. Please do not hesitate to contact us with any questions or comments; we’ll be happy to help however possible.FAQs
Are there specific industries that benefit most from equipment and vehicle finance?
Although almost any industry that requires equipment and the use of vehicles can benefit from vehicle and equipment finance, some benefit more significantly than others, including:
- Construction
Relying on expensive machinery and vehicles, construction companies can acquire what they need without significant upfront costs.
- Healthcare
A range of medical practitioners, from dentists and opticians to veterinarians, require advanced, expensive equipment. Using equipment and vehicle finance, they can remain ahead of the curve in technological advancements and provide premium services.
- Agriculture
From essential machinery to advanced agricultural systems, productivity and cash flow can be managed using vehicle and equipment finance.
- Manufacturing
State-of-the-art equipment and advanced upgrades are essential to stay relevant and meet competitive market demands.
- Transportation and logistics
Cornerstones of any successful operation, bespoke vehicles and equipment are a non-negotiable aspect of this industry.
- Food services
Restaurants and mobile caterers may wish to replace or upgrade crucial equipment and vehicles.
What are the interest rates for equipment and vehicle finance?
Vehicle and equipment finance interest rates in Australia vary based on several factors (lender, credit rating, nature of the equipment/vehicle, etc), but the following guidelines are generally applicable:
- Equipment Finance
Interest rates typically range from 7.50% to 15% per annum.
- Vehicle Finance
Although exceptionally complex and variable, interest rates for vehicle finance generally are between 5% and 20% per annum.
How long does it take to get approved for vehicle & equipment finance?
Vehicle and equipment finance approval times vary with each lender and specific application. However, some typical timelines are as follows:
- Pre-approval
A preliminary assessment of your likelihood of acceptance for equipment and vehicle finance is generally fast (a few minutes to a few hours) but is not a binding offer.
- Full approval
When your lender receives your completed application and associated documentation, the process usually takes one to five business days. They use this time to analyse your finances, credit history, and the details of the vehicle or equipment in question.
- Delivery of funds
Approved funds are usually disbursed in one to three business days, although less substantial amounts may be offered the same day for well-qualified applicants.
The period from initial application to the transfer of funds takes anywhere from a few days to two or more weeks.
What are the tax implications of financing vehicles and equipment?
Equipment and vehicle finance in Australia has tax implications that can affect and often benefit businesses, including:
- GST credits
Businesses registered for Goods and Services Tax in Australia (10% tax on most goods, services, and items) can claim credits for the tax they pay on financed assets (if used for business purposes).
- Deductions on interest
Any interest paid on loans is typically eligible for a tax deduction if a business finances the purchase of assets used in running the business.
- Depreciation
If the assets a business purchases through financing are liable to lose value, that depreciation is tax deductible. It is generally spread across the item’s working life.
- Maintenance and repairs
Repair and maintenance costs for finance-purchased business vehicles and equipment can be claimed as tax deductions.
- Fringe Benefits Tax (FBT)
If business-financed vehicles are also used privately by employees, they may be subject to FBT. Keeping detailed records is critical to accurately calculating and reporting liabilities.
While the tax implications of vehicle and equipment finance in Australia are clear, the intricacies can be complex. To take advantage of every opportunity to reduce the tax burden, seeking the services of a reputable small business tax return accountant is highly recommended.
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