The announcement of the annual Federal Budget is always a big event especially with economics analysts and experts, finance sector lenders and those sectors hoping for a big spend in their field. The measures and policies set the economic landscape for the coming year and the Government’s agenda for the future. But when the Federal Treasurer announced the 2021/22 Budget on 11 May, it may have attracted more attention than usual from the wider population. Following the generous stimulus measures handed out through 2020, many individuals and businesses may have been wondering, what will be in it for me? We recently published a post regarding the recent 2021/2022 Federal Budget, click here to read more.
As specialists in finance, we delved into the detail to find out how our motorbike loan customers may benefit from the measures announced and provide you with this overview.
Individual Taxpayer Budget Benefits
Individual taxpayers in some tax brackets received a benefit in the October 20/21 budget which was further extended in the 21/22 budget. The already legislated tax cuts were brought forward in October and backdated to 1 July 2020. That means those eligible taxpayers stand to receive a refund for tax overpaid from July through to when their employer started deducting according to the new schedule. That will be accounted for when taxpayers submit their 20/21 tax returns. Now that is an incentive to get your tax return in as soon as possible after 1 July this year!
In addition, taxpayers in the low to middle income range, that’s up to $90,000, also receive the Low and Middle Income Tax Offset (LMITO). This was brought in last year and has been extended for another year. The offset is up to $1080 and is deducted from the tax payable which may result in a generous refund.
That refund could represent a down payment on a new motorbike or possibly funds to have up your sleeve to cover motorcycle loan repayments.
For existing loan holders, you may consider making extra payments on your loan with your tax return. Secured Bike Loans allow for additional payments to be and as interest is calculated daily and charged monthly to the loan, this would result in a reduction of the total interest on the loan. Making extra payments would mean that the loan would be paid off earlier than the loan term. This attracts minimal break fees.
If you decide to use your tax refund or any other monies to make extra payments on your motorbike loan, be aware that you can’t change your mind and withdraw the funds. However, you can use extra payments against future scheduled monthly payments. Speak with your lender in regard to these matters so they are aware of your intentions.
Business Budget Benefits
From our perspective as a lender, the key budget measure that is of interest is the extension of temporary full expensing through to 30 June 2023. If you plan to purchase a motorcycle for use in your business then this may present you with a significant tax benefit.
Temporary full expensing is an accelerated asset depreciation measure, similar to Instant Asset Write-off which many business owners would be familiar with. It was introduced in October as part of the 20/21 Budget and essentially expanded and extended and hence replaced IAWO. IAWO was limited to businesses of a certain turnover and to assets of $150,000. Temporary full expensing can be utilised by businesses with turnover up to $5 billion which covers all but a handful of Australian businesses. The size of the eligible assets has also been significantly increased.
The ‘temporary’ means it is not a permanent tax measure but only in place for a set time period. As per the 21/22 budget, that time period is for assets acquired and operational in a business up to 30 June 2023.
The full purchase price of eligible assets including vehicles, plant and machinery can be fully depreciated as tax deductible in the year of acquisition. The usual practice is to depreciate an asset incrementally over several years, in line with ATO rulings.
To check if your motorcycle purchase and your business are eligible check the specific ATO ruling at https://www.ato.gov.au/Business/Depreciation-and-capital-expenses-and-allowances/Temporary-full-expensing/
In order to be in a position to realise temporary full expensing, the asset, in this case, the motorbike, needs to be purchased with the suitable loan type – Chattel Mortgage. With this type of business finance, the business realises a tax benefit through depreciation of the asset each rather than with tax deductible repayments as is the case with Motorcycle Leasing.
Check our motorcycle loan repayment calculator to work up rough estimates on a Chattel Mortgage for your business motorbike purchase.
The incentive to purchase through a Motorcycle Loan
One good news-bad news announcement in the budget was in regard to international borders. The bad news for those looking to head o/s on holidays – the Treasurer announced that borders would remain closed until mid-2022. The good news – that’s another reason to get a new motorbike for long tours and travels throughout Australia over the coming year.
For more good news on your proposed motorbike purchase, head to our calculators to check out our current cheap motorbike loan interest rates tool deals or call for a quote on a cheap interest rate motorbike loan.
For a cheap interest rate lending, give us a call on 1300 000 003 today.
DISCLAIMER: IN REGARD TO ANY ERRORS OR MISREPRESENTATIONS IN THIS MATERIAL, NO LIABILITY IS ACCEPTED. THE DETAILS, CONTENT AND DATA ARE PRESENTED PURELY FOR GENERAL INFORMATIONAL PURPOSES FOR MOTORBIKE BUYERS AND THOSE SEEKING MOTORCYCLE LOANS. THIS IS NOT INENDED AS THE SOLE SOURCE OF INFORMATION FOR FINANCIAL DECISIONS. IF SPECIFIC ADVICE IS REQUIRED AROUND FINANCIAL DECISIONS, READERS SHOULD SEEK THEIR OWN FINANCIAL ADVISOR.
