Buying a ute for your business?
Buying or selling a new business vehicle?
There are some benefits to having a chat with your accountant before making a large purchase or sale for your business.
Some points to consider;
1. Do you really have enough cash in the business to be able to make the purchase? Do you know what bills will be coming in, in the next few weeks and months? Do you have the cash flow to be able to pay for the purchase and the bills? If your really not sure you may want to ask your accountant to do a cash flow for you to find out.
2. Would it be better to lease a vehicle and make smaller payments than have a big upfront cost?
3. If you need to borrow money to make the purchase, do you need a financial forecast or letter of confirmation from your accountant to go with the loan application? (NB: you may need to give your accountant a couple of weeks to do this work for you). Money lenders typically will assess your ‘three C’s’ of credit. To decide if they will give you the loan, they look to see if you have the capital, capacity and character to service the loan. With capital, do you have the savings and assets that can be used as collateral for the loan? With capacity, do you have the ability (cashflow) to be able to make the regular monthly repayments? With character, how reliable are you to repay the loan? Your history will be assessed and you will be scored on these points and the decision based on this assessment.
4. If I sell a vehicle will I need to pay tax? How much will that be? You may sell your vehicle and use the money for something else, not knowing that down the track, when your next tax assessment is done, you have a sizable tax bill to pay on that sale. On the other hand there may be expenses that you can claim on too. So what taxes and claims apply to your business purchase?
So there are a number of considerations to take into account. These are just a few of them. We recommend that you talk to your Accountant first, before making a purchase, so that you can make the best decision for your business and be well informed.
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