Under new provisions, Australian businesses with revenue under $5billion, will be allowed to immediately write-off the full value of new assets as long as they are installed or used before June 2022 and purchased after 6th October 2020.
These new measures were unveiled in the latest 2020 Federal Budget Announcement and are a welcome change for those hoping to invest in energy efficiency projects like solar and microgrids, which can help businesses generate cash savings for years to come.
$4.9 Billion to enable business to carry back losses.
Under the new provisions the government will allow companies to carry back losses from the 2019-20, 2020-21 or 2021-22 income year to offset previously tax profits in 2018-19 or later years.
For example, in June 2021 (current financial year) if a company has a net operating loss of $300,000 due in part to the ability to fully deduct the full cost of the Solar and Energy Efficiency project they purchased from you in November 2020. The company can now carry that loss backwards to operating profits they made in 18/19 or 19/20. If they made an operating profit of $300,000 in 2019-20 then $300,000 (19/20) less $300,000 (20/21) equals a zero net tax liability and the company can apply for a refund of the tax they paid in 2019-20.
Any company with revenue under $5bn will be able to deduct the full cost of capital assets purchased after budget night and installed by June 2022.
This is an increase from the current instant asset write off which was to expire in December 2020.
As per previous comments regarding this topic your client will not be able to claim these Tax benefits if they use a PPA or a standard rental to acquire the Solar / Energy Efficiency project.
How Verdia Asset Finance can assist?
All the above is great, however if the client’s don’t have the cash or can’t borrow the money to make these purchases then it is redundant. In a year when the client is going to make losses it may make it difficult for their main bank to provide them funding approval to pay for the Solar / Energy Efficiency project.
While your client’s main bank will get bogged down in the high level details of the business, Verdia Asset Finance see the value in your project. Our fund focuses on the benefits your project will provide. By selecting the right equipment, by designing it correctly and installing it professionally and using the most recent energy bill. Verdia Asset Finance knows that the electricity savings will pay for our finance costs and this means we do not need financials to be provided to obtain a funding approval.
Your Skill Set + Verdia Asset Finance Credit Policy = A great offering to the client
**These views are the views of Verdia Asset Finance and all clients should seek their own tax advice and guidance from their own advisors.