Both businesses and individual tax payers have reason to be smiling at some of the measures announced in the Federal Budget on 6 October. We've covered a basic overview of the some of these measures in general in another article. Now, with the Budget Bill fast-tracked through both House of Parliament by 9 October, it’s timely to examine the detail more closely. Specifically, how the budget may affect your existing and future motorbike loans with Jade Bike Loans.
Personal Bike Loans
For wage earners the piece de resistance in the 2020/21 Federal Budget is without doubt the tax cuts which will put extra dollars into the pay packets for millions of tax payers.
There are a number of aspects of the tax changes that may be of benefit to you:-
- Bringing forward from 2022 to 1 July 2020 of the changes to the tax rate for two tax brackets and the possible flow-on effect to other tax brackets. This means an increase in take home for eligible tax payers with the increase varying across income levels.
- Back dating of the tax cuts to 1 July 2020 (the cuts were announced on 6 October) means those eligible will receive their entitlement from the 1 July to when their employer commences paying them at the new rate after 30 June 2021. When tax payers submit their tax returns for 20/21 their situation will be reconciled. This could mean a tax refund for you.
- LAMITO (low and middle income tax offset) has been extended and increased for some levels. This may deliver you an additional refund come tax time.
Timing is everything with tax cuts and in this case, changes were fast-tracked through Parliament. Unlike some budget bills in the past which have taken the sitting Government some time to negotiate through the Senate, the 2020/21 Budget Bill was passed on 9 October.
The ATO amended and issued the revised tax schedules for implementation from 13 October. Employers would need to update their payroll systems to the new tax schedule.
Effect on Bike Loans
Some may be wondering how these tax changes will impact the existing, being processed or future motorcycle loan application. We provide our take to elaborate.
- Existing bike loans: Jade Bike Loans establishes Secured Bike Loans at fixed interest rates, for fixed repayments and over a fixed loan term. An increase to the borrower’s nett income as realised through the tax cuts, should have no impact on existing loans. However, borrowers can choose to pay extra on their loans if they wish.
- Bike loans being processed: For those that applied for a loan and are awaiting approval based on wages before the tax cuts were introduced may like to update their application with their increased nett income amount. An increase in nett income may be viewed by lenders as improving your ability to a service a bike loan.
- Impending bike loan applications: If you’ve decided to buy a bike and apply for a Secured Bike Loan post tax cuts, for eligible tax payers, your nett income should be increased, giving you increased spending. These details would be entered on your new loan application in your discussions with your Jade consultant.
- New bike purchasers: For those that have received a tax cut and hence an increase in net wages, it might be the deciding factor to proceed with your bike purchase. You can use our bike loan calculator to receive rough repayment estimates on different bikes to assist with your planning.
- Pre-approved loans: If you have arranged a pre-approved loan based on your pre-tax cut income, you may like to speak with your Jade Bike Loans consultant to see if your increased nett income will have any positive impact on the offer we have arranged for you.
Business Bike Finance
Business purchasing motorbikes through their business may be eligible for the extended and enhanced Instant Asset Write Off measure and/or the temporary full expensing. These measures allow eligible businesses to claim a tax deduction on the purchase price of eligible assets in the year of purchase rather than having to depreciate the bike incrementally according to ATO rulings over several years.
Whether you implement this through IAWO or temporary full expensing is determined primarily by the business turnover. There are differing rulings in place for new and used assets. So if you intend to purchase your bike and take advantage of these measures, we advise you to consult with your accountant to confirm the best course of action for your business set up.
Purchasing a bike with the appropriate finance product is also critical. With Chattel Mortgage the bike is entered on your balance sheet so it can be depreciated under the ATO rulings in year of purchase. Currently and up to the deadlines which extend through to 30 June 2022, that can mean realising the full tax deduction in the 20/21 or 21/22 tax years.
Get Moving!
After periods of shutdowns and lockdowns due to the coronavirus, many motorcycle dealers will no doubt be super keen to move stock. So with tax cuts or tax deductions in hand, now might be a great time to buy that new bike.
For a quote on a personal or business motorcycle loan just contact Jade Bike Loans at 1300 000 003
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