Keep your cash. Here's how to make the most of the instant asset write off

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The 2020 Federal Budget includes an expansion to the instant asset-write off. It means you can buy equipment for your business and claim the purchase price as a deduction in your next tax return, instead of spreading it over the life of the asset.


So, it's a good idea to go out and buy some new commercial kitchen equipment, right? Well, maybe. But what if there was a better option?


What if you could keep the cash in reserve, have the flexibility to upgrade or return the equipment; and still end up owning the equipment (if you choose), for less than the advertised cost out of pocket?


SilverChef's Rent-Try-Buy you can do just that. Rent the equipment for the first 12 months, buy it at the end of the 12-month term, and – with the instant asset write off - end up out of pocket less than the list price of the equipment.


Don't believe us? Here's how…

Cathy runs a popular suburban restaurant called the Golden Door. COVID-19 meant fewer customers chose to dine in, badly impacting Cathy's revenue. To make up the shortfall, Cathy added takeaway dinner options to boost her evening takings, and takeaway coffee to boost her daytime takings.


With fewer people commuting to work in the city, The Golden Door quickly saw increased coffee trade from locals working from home. It didn't take long before there were queues of people waiting for their morning coffee.


Cathy knew she probably needed two baristas rather than one, so she could pump out more coffee to take advantage of the morning rush. She's excited about the instant asset write off because it will offset the outlay on a bigger coffee machine. Even better, she can now claim a wage subsidy of up to 50% when she brings on a new trainee barista.


Cathy selects her dream 4 group coffee machine for $20,000. She thinks it's worth the investment and hopes they'll sell enough coffee to make it worthwhile.


If Cathy chooses to finance the coffee machine with Rent-Try-Buy she could keep the $20,000 cash in her back pocket for other expenses. Cathy rents the coffee machine for the first 12 months, paying just $254 in rent per week – an amount she'll easily cover in coffee sales. If her overall coffee sales over the next 12 months don't justify the investment (for example, if COVID forces another complete shutdown), she can return the coffee machine at the end of the term and make no further rental payments.


However, if she loves the coffee machine, and has built up a loyal following with her fast service and superior coffee, she can buy out the coffee machine at the end of the 12 months. She's paid a total of $13,200 in rent and can claim a tax deduction of $3,432 on the rental payments leaving her out of pocket $9,768.


To buy the coffee machine at the end of 12 months, her payout quote from SilverChef is $12,100, and she can claim a tax deduction of $3,146, leaving her out of pocket $8,954. In total, her costs to rent and then own the machine work out to $18,722. This is $1,278 less than the list price of the machine.


In this scenario, Cathy owns the machine at the end of 12 months if she chooses to, but keeps the option to return it if things don't go to plan – and she still ends up investing less than the list price of the machine.


Cathy's coffee machine workings


Coffee machine list price $20,000

Weekly rental payment with Rent-Try-Buy $254

Total rent to pay in year one $13,200

Tax deduction $3,432

Out of pocket – Rent $9,768

Purchase price end of year one $12,100

Tax deduction $3,146

Out of pocket- Machine purchase $8,954

Total ownership cost @ 12 months $18,722

"With the uncertainty that COVID-19 continues to present, Rent-Try-Buy means you can stay nimble while still taking full advantage of the tax incentives in the 2020 Federal Budget. "

To summarise, Cathy’s options with Rent-Try-Buy are:

  • Cathy can rent, then own the equipment at $1,278* less than the cost of the asset
  • Cathy can return the equipment at end of the 12-month term and make no further rental payments
  • Cathy can upgrade the equipment through SilverChef at the end of the term and return the existing equipment
  • Cathy can keep renting if she decides to try it for longer than the 12 months and will be able to claim the deduction for purchase up until 30th June 2022.

*Includes tax deduction benefit

Rent-Try-Buy mitigates risk

Whatever the commercial kitchen equipment you're after – from dishwashers to refrigeration and ice makers to coffee machines, now could be a great time to invest in upgrading your equipment. But you don't have to hand over all your cash reserves right now to benefit.

With the uncertainty that COVID-19 continues to present, Rent-Try-Buy means you can stay nimble while still taking full advantage of the tax incentives in the 2020 Federal Budget.


Visit the Rent-Try-Buy page to find out more and apply.


Disclaimer

This information is current as at 16 October 2020 and is for general information purposes only. SilverChef does not provide tax, legal or accounting advice. This information has been prepared without considering your objectives, financial situation or needs and you should seek advice from a qualified professional before acting on it.

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