Given that COVID-19 has plunged the economy into uncertainty, it might seem like an odd idea to be updating business equipment right now. There are certainly arguments in favour of postponing decisions and playing a wait-and-see game. Successful business owners, however, know that getting the timing right is important, and delaying now could see you missing out on valuable opportunities.
Why it’s especially important now to keep equipment up-to-date
Your equipment plays a vital role in helping you to achieve your business goals by earning revenue while, ideally, keeping costs as low as possible. Depending on your business type, you cannot function without, for example, your vehicles, manufacturing plant, agricultural machinery, medical devices, office furniture or computers. The more up-to-date they are, the more likely they are to increase your revenue and lower your maintenance costs.
However, it’s important not to update just for the sake of it. Work out how much extra revenue or cost savings your new equipment will deliver, and compare it with the finance and usage costs. You need to see a positive outcome to make it worthwhile but in these particularly challenging times, you may also want to prepare for the bounce back to normality. If the economy bounces back quickly there may be a significant demand for new equipment, which could result in shortages. You’ll be sitting pretty if you’re all tooled up and ready to go.
Now is a favourable time for equipment purchases
As the financial year draws to a close, it’s a good time to review your equipment needs. You can take advantage of end-of-financial-year sales, when equipment manufacturers are ready to discount their stock in order to meet annual sales targets. Understandably, there may be even more price reductions this year than normal.
If you have already made asset purchases in the last year or decide to purchase soon, you might qualify for tax benefits from the revised instant asset write-off scheme. This allows businesses with an annual turnover under $500 million to write-off qualifying asset purchases with an individual cost of up to $150,000 as a tax deductible expense in the current financial year, provided that the asset is first installed and ready for use by 31 December 2020.
Equipment finance could help preserve your working capital
Right now, though, you probably have extra demands on your working capital. You may need to continue paying your employees and creditors, while also working to keep the doors open.
So if you are looking to purchase new equipment without using your working capital, equipment finance could be a solution. There are a wide range of options, including:
- Finance lease
- Commercial hire purchase
- Specific security agreement (Chattel mortgage)
- Rental agreement
Contact your accountant for advice
In some cases, your accountant will structure your finance so that not only are the tax deductions optimised, but the initial repayments are also lower helping you navigate this uncertain period.
The end of the financial year is approaching quickly, so if you are interested in upgrading your equipment, contact our team of Equipment Finance specialists at firstname.lastname@example.org to find out more.
Finance provided by BOQ Equipment Finance Limited ABN 78 008 492 582 (BOQEF). BOQEF is a wholly owned subsidiary of Bank of Queensland Limited ABN 32 009 656 740 (BOQ). BOQ does not guarantee or otherwise support the obligations or performance of BOQEF or the products it offers. This blog post is for general information purposes only and is not intended as financial, taxation or professional advice. It has not been prepared with reference to the financial circumstances of any particular person or business and should not be relied on as such. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article.