With the end of the financial year fast approaching, now is a great time to purchase a work vehicle or equipment for your business. The Federal Government passed legislation last year to extend and increase the instant asset tax write-off for small businesses. That means if your business is eligible, you could potentially make several purchases up to $30,000 each this financial year, then claim the expenses back on your next tax return – and get the tax-man to help you pay for it!
We’re happy to work with you and/or your accountant to maximise your business cash flow and tax advantages, whatever these may be. We have access to a very wide variety of lenders who offer multiple ways to finance the business items you need.
Here are some popular business equipment finance options to give you a general idea of how we can help.
The great thing about leasing is that you can access the latest equipment and vehicles with no capital outlay. The lender retains ownership of the asset and you lease it back from them at a fixed monthly payment. Once the lease is up, you can choose to pay a ‘residual payment’ and buy the asset, then potentially trade it in and upgrade to a newer version. Another option is to refinance the residual and continue leasing.
- You’ll know what your payments are and can manage your cash flow accordingly.
- You may be able to claim the lease payments as a tax deduction (speak to your accountant).
- There could be other tax benefits, including potentially making advance lease payments for tax or cash flow purposes (again, it’s best to consult your accountant).
- You may be entitled to claim a GST credit for the GST included in each lease payment.
- There’s flexibility to reduce the size of your payments by increasing the residual amount at the end.
- You can keep your assets up-to-date and some equipment leases can potentially include a service contract.
In addition to finance leases, there are also operating lease agreements. This is when you don’t take on the obligation to pay the residual value at the end. The asset is simply handed back to the lender.
Again, a hire purchase allows you to obtain the latest equipment and vehicles for your business, whilst preserving your cash flow. With this finance option, the lender purchases the equipment or vehicles you require, then hires it to your business for a specific period. It’s like a finance lease, but when the final payment is paid, your business immediately owns the asset.
- Won’t tie up your cash
- Generally, doesn’t require additional security
- Depreciation and interest on any lease repayments may be tax deductable (check with your accountant)
- You own it at the end of the hire period.
A chattel mortgage is another type of finance option that works well for businesses. The financier secures the loan using the “chattel”, or the vehicle or equipment you purchase. You take ownership of the asset, and the mortgage is registered with ASIC. Once the loan is paid off, the mortgage is removed, and the vehicle or equipment is officially yours.
- If you’re registered for GST on a cash basis, you may be able to claim the GST in your vehicle’s price up-front through your next Business Activity Statement (BAS), (check with your accountant).
- GST is not payable on your repayments
- You may be able to claim depreciation and the interest charges on your chattel mortgage as a tax deduction (again, consult your accountant)
- Lower interest rates generally apply as finance is secured against the asset
- You may be able to decrease your regular repayments by paying a deposit upfront, trading-in a vehicle, or opting for a balloon payment at the end of your loan term
- You can manage your business cash flow more effectively.
Loans and other finance options
In addition to these popular ways to finance vehicles, machinery and equipment for your business, we can also offer a wide variety of business loans – both secured and unsecured. These can be used for anything from equipment purchases to inventory control and cash flow management.
Whether your business finance needs are straightforward or more complex, we can help you find the right solution. Our business lender panel includes peer-to-peer lenders, private funders and major banks. Best of all, we offer fast turnaround times – we could potentially get your finance approved in as little as 48 hours*.
Remember, EOFY is sale time for vehicles, IT, machinery and equipment – so there may also be bargains to be had. Contact us today and we’ll get the ball rolling on your finance in plenty of time to make your purchases before June 30.
15 May 2019
The busy Autumn selling season is in full swing, with many property bargains available as the housing market correction continues across the country. With the Federal Election looming this weekend, we can expect to see property market activity to slow a little too. Meanwhile, economists predict there may be good news on the horizon for home owners, with the possibility of an RBA rate cut increasing after the Federal Election is over.
Interest rate news
As expected, the Reserve Bank of Australia (RBA) decided to keep the official cash rate at 1.5% during its May meeting. Early in April, many banks cut rates on Fixed Rate Home Loans in anticipation of RBA rate cuts later this year.
During the last week of April, the Australian Dollar went on a surprising slide below US$70c after the US Federal Reserve failed to cut interest rates, despite demands from President Donald Trump. Analysts predict the RBA is likely to cut rates in order to stimulate a continuation of this trend, as a lower Aussie Dollar will be great news for our economy.
Home value movements
During April, the housing market correction started to have a significant impact on homeowners. According to ANZ, almost 5% of households have slipped into negative equity on their home loan. (That’s where you owe more on your home loan than the current market value of your home).
The Housing Institute of Australia has also indicated that several hundred thousand new apartments and units are about to hit the market, which may cause home prices to fall even further.
Nevertheless, analysts are still saying home values should start to recover in 2020, so the current market conditions are only likely to affect homeowners wanting to sell this year. Meanwhile, it’s a great opportunity for those looking to get onto the property ladder – particularly for first home buyers looking for bargains at the lower end of the market.
Property market activity
Despite the housing market correction, the Autumn property market has been very active, with more homes now being sold via private sales than auctions. The table below shows property market activity as at May 6, 2019.
If you’re in the market for a bargain, see us about a pre-approval!
Just a reminder that bank lending criteria have tightened over the past 6 months, so it’s important to see us to check your borrowing power and to get a pre-approval on a home loan if you’re in the market to buy property.
Please call us today to find out more.
Mike & the Element Finance Team
30 Apr 2019
Laws have been introduced to make it harder for landlords to refuse requests by tenants to keep pets, in most states. However, allowing pets to live in your investment property can be a double-edged sword. On the one hand, you’ll have a wider pool of prospective tenants, potentially increasing your rental returns and helping you to retain tenants longer. On the other hand, there is also the potential for pets to cause damage. So, what can you do to protect your investment?
Catering for pets in your investment property could help your tenants prevent their pets from causing any serious damage. Here are some great tips for catering for ‘fur-children’ in your investment property!
Modify the property to make it pet-friendly
Since you may not be able to avoid renting to tenants with pets, you may like to add pet-friendly features to reduce the risk of damage to the interior of the property. Providing facilities to help your tenants keep their pets outdoors will minimise the time they spend inside the house, which may save you money in the long-run on maintenance and repairs.
For example, a secure cat or dog door will make it easier for small pets to get out. This will reduce the need for litter trays and discourage them from doing their business inside. It will also eliminate the tendency to scratch at a door or flyscreen when they want to go out.
Include some outdoor features for pets
One necessity for pet owners is a well-maintained fence to keep their fur-children safe when outdoors. Ensure there are no gaps where a pet can easily escape. The risk of a pet getting out is likely to cause your tenants to leave their pets inside the house, rather than in the yard and over time, this is likely to cause the kind of damage you want to prevent.
Another great idea is to provide a pet enclosure or pen in the garden, with a covered area where pets can take shelter from the sun and rain. If your tenant has a large dog, they will think this is a great option and may even pay more to rent your property. Cat lovers will also appreciate a secure enclosure where their cats can enjoy the sunshine and fresh air without being left to run loose – many councils make it illegal to leave a cat outdoors after dark, and busy roads are always a worry.
Additionally, it may be a good idea to modify the garden to make it low-maintenance and suitable for pets. Rather than worry about the pets digging up your expensive landscaping, keep things simple with grassy areas and plenty of bushes and shrubs for shade.
Avoid expensive carpets
With an investment property, it’s best to choose flooring that will be durable and easy to keep clean in the long-run. Carpets are never a great option as they breed dust mites and are a hazard for asthma sufferers – but throw a pet into the mix and things can get smelly! Hard flooring – like tiles or laminate – is likely to be a better option, as it wears better than carpets over time, and is much more resilient to those little accidents which often occur with even the best trained house pets.
If your property already has hard wood floors, simply take up the carpets and get them sanded and polished. Alternatively, there are some great inexpensive vinyl flooring options that look fantastic and are extremely easy to clean and maintain.
Consider taking out landlord insurance
Before tenants with pets move in, it’s a good idea to consider taking out landlord insurance. Importantly, make sure your policy covers damage caused by a domestic pet or animal residing in your property. This is not always the case, so be sure to read the fine print.
Pet-friendly rental properties are often in high demand, and as an investor, it may work to your advantage to allow pets into your property. It will certainly give you access to a wider market of renters, some of whom may be willing to sign longer leases and/or pay higher rents for your property if you cater for their pets the right way.
If you’re in the market for an investment property, or you already own one but are considering renovating or refinancing, we can help you obtain the right loan for your needs. Please get in touch today!
26 Apr 2019
Which home loan is right for you? How can you tell when there’s so many different lenders, loan types and features to choose from? How can you compare loans properly when you’re not sure what you should be comparing?
Finding the right home loan for your situation is a process that can be confusing, particularly for first-timers. In this article, we give you a basic guide for making home loan comparisons and tell you more about the features you may need with your home loan.
Interest rates and comparison rates
Interest rates are one of the factors which determine the cost of your mortgage and how much your repayments will be. Even a small difference in interest rates can make a significant impact on the amount of interest you’ll have to pay over the term of the loan. However, the loan with the lowest interest rate may not necessarily be the cheapest, as there could be additional fees to factor in. This is where the comparison rate comes in.
The comparison rate is an indication of the true cost of a loan, once the interest rate and fees are included. It’s usually expressed as a percentage, which makes it easier for you to compare the real cost of different loan products. When choosing a home loan, it’s important to look at both the comparison rate and the features that come with the loan.
Principal and Interest
This type of home loan requires you to make repayments that cover both the principal (or the amount you borrowed) and the interest at the same time. People buying their own home usually use a principal and interest loan, as you pay down your loan with every repayment until you eventually own the property.
An interest-only loan allows you to only pay the interest you owe on the loan for a fixed period – usually from one-to five years – so the monthly repayment is lower than it would be under a principal and interest loan. At the end of the fixed period, the loan usually reverts to a principal and interest loan, but it is possible to refinance to another interest-only period. People buying an investment property often start off with an interest-only loan because the interest (and therefore the entire repayment) is tax deductible for them. However, they are not considered ideal if you are buying your own home to live in as you will likely end up paying more in interest over the term of the loan and your repayments don’t pay off the original loan amount.
Variable Home Loan
With a variable rate home loan, the amount of interest you pay may go up or down in response to changes in interest rates. This can be a good thing if interest rates go down, as the interest you pay will be less and your repayments will decrease. Another positive is that you can often make extra repayments on a variable home loan, which may help you to pay off your home loan sooner and save some interest over the term of the loan.
Fixed Home Loan
A fixed rate home loan lets you lock in your interest rate for a period (usually 1 to 5 years). The benefit is that you know exactly how much your repayments will be during that time, which can be beneficial if you’re on a tight budget or a fixed income. You’ll also escape any interest rate rises that may happen during the fixed period.
However, if interest rates fall, you won’t be cracking open the bubbly because your home loan interest rate will stay the same and so will your repayments. There may also be restrictions on making additional repayments with a fixed rate home loan.
Split Home Loan
One option that appeals to some homeowners is to fix the interest rate on a portion of their loan and keep the rest variable. This offers the certainty of knowing what your repayments will be on the fixed part of the loan, while you can make extra repayments and enjoy any interest rate drops on the variable part of the loan. It’s a way to get the best of both worlds!
An offset account is a transaction account that’s attached to your home loan. It can save you money on the interest on your home loan and help you pay off your loan sooner because the money in your transaction account is offset daily against your loan balance, and you only pay interest on the difference. For example, if you owe $300,000 on your home loan and there’s $50,000 in your offset account, you’ll only pay interest on $250,000.
A redraw facility allows you to make extra repayments on your home loan and then take out the extra repayments you’ve made later if you need to use the money for a different purpose.
What’s right for you?
The right home loan choice is different for everyone. It all depends on your personal financial circumstances and goals. We’re here to help you decide what is right for you and will make recommendations based on what you tell us about your situation and what you want to achieve. Then we’ll compare the choices from the different lenders and offer you a selection of cost-effective options.
Don’t wait to find out what’s right for you. Call us today for a chat about your plans.
23 Apr 2019
Renovating your home or investment property is a fantastic way to add value. But what’s the right way to finance the renovation project you have in mind?
There are several ways to finance a renovation – the option that will work best for you depends on the size of your project, your budget, financial circumstances and your goals. Your mortgage broker is an expert when it comes to helping you choose the right loan option for any renovation – here’s an outline of some of the finance options we recommend to get your renovation dreams off the ground!
Line of credit
The benefit of a line of credit is that you only pay interest on the money you use. The way it works is that you apply for a line of credit against your home with an approved limit, then simply use the funds as needed.
You can pay off the balance as you go, then use the funds again later for the next stage of your renovation – much like a credit card. If you want the freedom to pay tradespeople or buy materials whenever you need to, a line of credit may be ideal, particularly if your renovations are ongoing.
A personal loan is a good option if your renovation costs are relatively small, or you plan to pay the loan off quickly. With a personal loan, you can secure the finance against an asset, such as property or term deposits, or opt for unsecured finance without collateral (this option usually has a higher interest rate). The application process is usually quicker than for a home loan and the money is deposited into your account for you to use as required.
Interest rates on personal loans are usually much higher than home loans, however we have access to competitive rates, so we can potentially help you save. Depending on how and when you plan to pay back the loan, you can choose a variable or fixed rate option. Many personal loans allow extra repayments so you can pay it off sooner and reduce the interest you’ll have to pay, so talk to us about the right one for your needs.
Construction loans are a great option for larger renovation projects that require a builder. This could include anything from a small extension to a complete knock-down and rebuild. With a construction loan, the lender will use the final value of the property post-renovation to calculate how much you can borrow. Once approved, you can draw down periodic progress payments at different stages of construction.
A construction loan offers significant benefits for larger renovation or building projects:
- You only pay interest on the money you draw down.
- The payments are interest-only during construction.
- Each stage must be inspected and completed before you can draw down the funds for the next stage. This helps to keep your builder on track.
- The loan converts to a home loan of your choice after construction is completed.
Refinance to access equity
When you refinance your home loan to access your equity, you end up with a sum of cash to use as needed or to finance your renovation project. Refinancing your home loan could be a good idea if you’re ahead on your loan repayments, your property’s value has increased, or you’ve paid down your home loan considerably since you took it out. (It may not be a good idea if your property has fallen in value, or your financial circumstances have changed for the worse since you purchased it.)
Refinancing may also allow you to access other useful features such as a line of credit, or a redraw facility – which could be useful if your renovations are ongoing. It’s important to remember you may not be able to access all your equity – so talk with us and we’ll help you work out your borrowing power.
What’s right for you?
Whether you’re planning to make a few cosmetic improvements or give your property a complete overhaul, chat with us about the finance side of things. The right loan choice will depend on where you’re at financially and what you’re hoping to achieve. For example, the finance we recommend for those renovating their own home may be different from what we’d suggest for those renovating an investment property, or those flipping for profit.
If you’d like to find out more, just give us a call today.