As I write, the Reserve Bank of Australia has again kept interest rates on hold, for the fourth consecutive month, giving respite to mortgage holders who have experienced a rise of 400 basis points since April 2022. Runaway inflation remains in the sights of the Reserve Bank, but there are signs it’s being controlled, with many economists now expecting interest rate cuts in the near future. While rate rises are causing serious hurt in the economy, the wholesale rates which determine the commercial rates offered by prime lenders are now being discounted among stiff competition, demonstrating their effectiveness.
We previously observed prime rates at or marginally above seven per cent, largely where they remain, save for one quarter of a percentage point. However, secondary lenders have felt margin pressure and most now average closer to 10 per cent, for prime assets. This further cements the need for customers to shop for the right finance deal.
We are seeing signs of easing prices of cars and capital equipment, which have been in short demand as supply chains were decimated by the world health crisis. This alone has been a major contributor to inflation. Shorter forward order times and rising stock levels spell good news for buyers, and hopefully will contribute to drive inflation – I suspect rapidly.
Instant writeoff
As noted last issue, the unlimited and never-before-seen 100 per cent writeoff for capital equipment ended on June 30, replaced by a modest $20,000 instant writeoff.
Terrible news?
Perhaps, but a few points could be considered to help stay ahead of interest rates and inflation.
First, as an instant writeoff measure with an unlimited ceiling, it provided a sugar-hit tax deduction which could result in a massive tax loss, wiping out that year’s tax bill. However, the one-time writeoff could result in a much larger tax bill in the following year, particularly when additional income and reduced expenses stemming from the purchase have an impact. Now that standard depreciation rates for vehicles and equipment have returned, the need to upgrade vehicles and machinery remains, even if only to stave off the impact of the end of the 100 per cent writeoff provisions.
Consider:
• Writing off individual purchases of up to $20,000 (plus GST) in the current financial year
• Making many purchases to multiply the $20,000 writeoff with no limitation
• New and used equipment, accessories, upgrades
• Adding multiple assets to any finance agreement to form a single loan agreement, and
• Adding multiple $20,000 accessories or add ons to a core purchase to maximise deductions.
Finance broking
When I joined the finance broking industry, the industry association at the time was the Australian Lease Brokers Association (ALBA), and I recall attending a meeting in the 1990s when there was a formal resolution to change the name to the Australian Asset Financiers’ Association (AAFA), avoiding the perceived stigma of being described as a broker. Fast forward 30 years and the Commercial Asset & Finance Brokers Association (CAFBA), of which Australiawide Finance is a proud member, is a truly national organisation, representing the interests of the commercial finance broking industry and acting as a regulator, with direct links to government, and the only representative professional body exclusively for asset and commercial property finance brokers. CAFBA members’ customers are assured they are getting service from a broker with a standard of professionalism and maintained ongoing education to meet the requirements for continued membership. Members undergo regular police checks, hold professional indemnity insurance, and undergo regular mandated professional development days. My colleague and partner in Australiawide Finance, Jane Lorimer, is a member of CAFBA’s Board of Directors, the Womens’ Network Committee and the Diversity & Inclusion Committee, which reflects CAFBA’s commitment to improve and develop the standards for all CAFBA members and their customers.
Finance is now readily available from many sources: point of sale; directly from a wide variety of financiers, many different styles of brokers and agents, some of whom participate in other industries such as real estate, mortgage broking, insurance and financial planning. We would love to hear from you with any questions or feedback you may have, but we also strongly urge you to seek finance from a suitably qualified finance professional such as a CAFBA member – it’s among the few ways to gain access to a highly qualified professional who can give you access to the best finance deals in the marketplace, protect your business interests and assist your growth into the future.
As seen in the October/November 2023 Issue of The Australian Arbor Age Magazine
