Home – New Forums Money matters to Loan or pay cash?

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  • #964536
    Kathyhops
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    Hi everyone,

    I have been running my business parttime for nearly a year now, and am looking at buying some furniture and new computer equipment before the end of the financial year, especially with the small business government incentive available at the moment.

    I am only looking at spending $5G tops. We have that money – just, which would mean that we would have no savings left, but all goods owned. Or should I get a sup loan for this? I am so unsure, I hate the thought that we would be in more debt and have another bill to pay each month, but I also hate the thought of not having ‘backup’ cash.

    My partner doesn’t like the thought of me spending the money at all! I’m sure it was his business it would be a different situation, and I personally believe, that $5000 for capital aquisitions is reasonable considering I have been working out of a ‘spare room’, only with what I had already to begin with. I don’t allow clients to visit me, as I am embarressed of where I work. But over the year, I have actually done very well for myself, especially considering I have only worked part time. He seems to think that it needs to be justified by extra income that it would produce, understandably, but what about me and my comfort, and how much time I would save by not having to drive to all over town to visit client’s residences.

    The interest on the loan will be tax deductible, as too the bank fees, so I am trying to weigh it up. Can any body offer some professional advice of what they may do in my situation. I keep meaning to ask one of the accounts I would for (I work for three of them!) but I don’t want them to know my personal financial situation, as to them I am a professional, and am yet, to get my own accountant away from the ones I work with.

    Thanks for reading, and looking forward to some advice.

    Kathy Hopkins

    #1006371
    Burgo
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    Typically male.

    You probably need to update your computer on a regular basis ( every couple of years or so). Having the latest equipment must surely be a plus for anyone who earns their living from these contancaress machines.
    Just put it to him that it is an investment, teach him how to type and give him the old machine to help you out. He will soon change his mind and insist that the best is not good enough.

    From a typical male
    ps pay cash and write it all off in this financial year, will save you TAX

    #1006372
    Kathyhops
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    Either either it will save tax, that is my whole aim!! Even if it is a loan, I can claim it up front, so it will definately be deducted as a business expense in this financial year.
    Thanks though for your typical male response!! I may have to do just that, get him to work from my desk for a few weeks, then he may change his mind!
    I was just hoping there may be some magic advise out there for me.
    Oh to win the lotto……..that would be nice!
    thanks burgo

    #1006373
    Burgo
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    What I am saying although you will be able to clain the repayments of the loan off tax for the period of the loan 1, 2, 5,years. However by paying cash you get the 100% deduction off this years tax.

    #1006374
    Kathyhops
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    Hey Burgo, I am pretty sure that I can only claim the depreciation (with the govt thingo), not the whole cost of the asset, so as I have aquired the item in this financial year, I claim depreciation this year. I can’t claim the loan repayments either way as it is a liability, not expense, just the interest and charges.
    I’m just trying to reduce the tax a bit, so it has to be purchased, but how.
    I was hoping someone would make it easy for me!! I hate spending money, love shopping though.
    Any accountants out there?? I could be so wrong.

    #1006375
    McAdam Siemon
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    Hi Kathy,

    This is a cashflow issue for your business. I would suggets you need to look at your cashflow for the next 12 months and ascertain if you can afford the inital outlay in cash or if you need to finance it.

    My preference with any buisness assets is to finance it as it is more effective cashflow wise. All deductions will be the same either way if you buy it outright or finance it.

    Dont tie up all your cash in your non-current assets like plant and furniture, they are just necesities not essentially income producing (generally).

    Good Luck Kathy

    Sam

    #1006376
    Past-Member
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    See these links for very small businesses at the ATO site.

    http://www.ato.gov.au/businesses/content.asp?doc=/content/00102629.htm&pc=001/003/084/001/001&mnu=&mfp=&st=&cy=1

    http://www.ato.gov.au/businesses/pathway.asp?pc=001/003/084

    I was in the Simplified Tax System which is now the Small Business Concessions. I can still deduct immediately any small asset expense (including software upgrades) of $1000 ex GST. The rest go are depreciated over 3 years like my office furniture or car. My computers are depreciated over 3 years. I generally update every 2.5 years.

    The ATO has some good info.

    Regarding cash or loan – I pay cash/credit card for most things because in this economy we don’t like to have loans. Having said that, sometimes a rental agreement over 3 years max is a good idea for computers etc. But you have to pay an agreed amount at the end if you want to keep the computer/laptop.

    If you do up your office before 30 June you should be able to depreciate the amount over 3 years and get the bonus deduction as well from what have read. But please check with the ATO as I am not an accountant.

    I also recommending having a good accountant from day 1.

    I have a Visa card that I pay my businesses expenses on which is really helpful. You can pay your business bills immediately and suppliers will love you. Just make sure you only spend what you know you can pay or budget for.

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