JobKeeper has come to an end, the government is rolling out vaccines to protect against COVID-19, and our collective fingers are crossed for a new financial year that brings confidence, growth and consistency. So, what do you need to consider before this financial year closes out, and we launch into the next? mivision sought the advice of Paul McKinley – chartered accountant and managing director of Optometry Finance Australia, and Craig Spiegel Director and co-founder of the medical lending specialist Credabl.
Paul McKinley: The Federal government is keen to help small to medium enterprises (SMEs) rebuild and recover from COVID, via its SME Loan Guarantee Scheme, which guarantees 50% of the loans approved by 31 December 2021.
The scheme was recently expanded and extended via the SME Recovery Loan Scheme, which aims to help businesses that were receiving JobKeeper between 4 January and 29 March 2021. The loan size has increased from AU$5m to $10m, and lenders are allowed to offer an initial 24 month repayment holiday.
Taking advantage of the instant asset write-off has the effect of significantly reducing your tax bill, in the year in which it is purchased
While these loans still require security, in the event the borrower defaults and the bank repossesses, the government will step in and cover any shortfall. This equates to a lower ‘risk’ or exposure to the bank, which should translate to lower interest expense for the client. Good to know also, that the Government is encouraging the banks to get on board with this scheme.
In addition to these schemes, as our economy continues to recover well, you may find opportunities that need funding. Consider the reserves you have, and what you may need.
There’s a myriad of different loan products out there, from secured commercial loans (that might use the family home as collateral) to secured and unsecured overdraft facilities that offer excellent flexibility and only require recent bank statements (no financials needed).
Craig Spiegel: Faced with tightening restrictions and an unforgiving economic environment, the term ‘cash is king’ has come to the fore. It is critical to ensure you have sufficient cashflow to cover your annual expenses. However, this doesn’t mean you have to have all your pennies sitting in the bank. If your money is tied up, you can consider options such as leveraging assets or arranging access to additional funds with the likes of an overdraft facility. Make sure you review your financial performance ‘excluding’ any government payments during the year in order to gauge your real performance.
Buy Now Pay Later (BNPL) for business acquisitions is another option. There isn’t much for sale today that has escaped this new-age payment method. Typically this has only been available to the consumer. In the medical space BNPL for capital equipment can take the form of a loan with an initial no repayment period, no interest etc. These loans are backed by traditional lenders in the health space. Liquidity, tax deductions and the time to optimise equipment use are among the many benefits that BNPL can unlock for your practice. Of course, you should always consult your network of advisors to ensure that any solution you consider is appropriate for you.
INSTANT ASSET WRITE-OFF
Paul McKinley: If you need new items of plant and equipment, including vehicles (note car depreciation limits apply), now could be the time. The instant asset write-off allows for the full expensing of eligible assets up to $150,000 to 5 October 2020 with no cost limit (temporary full expensing) from 6 October to 30 June 2022. The eligible assets must be “used or have been installed and ready for use” in the year in which they are claimed.
Taking advantage of the instant asset write-off has the effect of significantly reducing your tax bill in the year in which it is purchased. For example, a practice operating under a company structure purchasing a new $90,000 optical coherence tomographer could look to save $23,400 in company tax for the FY21 year. But speak with your accountant here, as turnover limits apply, and it’s worth considering which year it may be best to claim this.
Craig Spiegel: If you are considering purchasing assets for your practice, such as new equipment, upgrading your practice fit-out or even a new car for personal or business use, presenting this information to your accountant earlier on will give you a substantial advantage when it comes to settling your final tax bill.
Craig Spiegel: One of the best ways to save yourself some cash and make sure you’re in the best financial position is to review your borrowings, especially your home loan. The market for owner occupied and investment property loans is incredibly competitive right now with interest rates at all-time lows. And while your interest rate is very important, there are a number of great reasons to consider reviewing your current facilities and lenders, including whether or not you need access to cash, if your personal circumstances have changed or if you foresee any change in your income structure.
Paul McKinley: Have a look at your debtors, and determine which are ‘bad’ (unlikely to be recovered), and write them off as a bad debt. Ensure you write off any obsolete stock during your 30 June stocktake and speak to your accountant regarding the different stock valuation options available to help minimise your tax.
Consider other expenses you might bring forward to reduce your taxable income as well. For example, your June quarter superannuation contribution for employees (super guarantee) is normally paid by 28 July, however if it is paid (and cleared) by 30 June it will be deductible in the current financial year.
It’s also a great idea to speak to your accountant or financial advisor regarding maximising your own personal deductible super contributions.
Paul McKinley: Benjamin Franklin’s famous quote “if you fail to plan, you are planning to fail” could never be truer today. Revisit and update your business plan annually, including your SWOT (strength, weakness, opportunity and threat) analysis. Review your budgets, and analyse your practice’s financial performance (monthly) against these figures, and if it has come off the rails, take action (not at the end of the year – that’s too late)
PROTECT YOUR CREDIT SCORE
Paul McKinley: Above all, protect your personal credit report so that you have a ‘clean bill of financial health’ should you need to take out a personal or business loan in the future. Be wary of consumer oriented ‘buy now pay later’ interest free offers. Although they sound attractive, should you miss a payment, you will be penalised with hefty interest rates. Additionally, a history of purchases on buy now pay later arrangements may negatively impact your ability to arrange a loan in the future. Other financial ‘behaviours’ that will negatively impact your ability to take a loan include maintaining a high credit card limit or often accepting increases to your credit card limit when offered.
Paul McKinley: Our people are our biggest assets. Now is the time to recognise and reward them with perhaps a wage review or a small bonus. Review their key performance indicators for the next financial year, so they’re crystal clear on exactly what your expectations are.
ALWAYS SEEK EXPERT ADVICE
Before making any decisions that may impact your tax liabilities, it’s important to consult your accountant. When dealing with a lender, it is imperative that you deal with a specialist who knows your profession and speaks your language.
Optometry Finance Australia is an independent optometry finance broker. Based in Western Australia, they provide a fast, tailored approach to the lending needs of optometrists around Australia.
Credabl is a medical lending specialist with a national presence. The majority of its team have been in the industry for over 15 years, assuring you of a deep understanding of various healthcare professions.
These aren’t the only specialists that can offer advice. From accountants and laywers to suppliers, there are plenty of industry specialists who know the ins and outs of your industry and can help you along your journey.