If you're in the market for a new car, you've probably started to think about what type of car you'd like. You've also probably started to think about how you can pay and what you can afford. Did you know that using an ABN to purchase your car can help in more ways than one?
Getting an ABN is relatively easy. So many of us do something on the side. Either as an additional income stream from our permanent employment, or something while we stay at home with the kids. Whether that's a small dog-walking business, or selling hand-crafted baby clothes. Whatever it is, if you decide that it's no longer a hobby and more of a business venture, then it's time to register for an ABN.
Once you have an ABN, your options for car financing increase. Not only can it make the loan easier to get, there are also tax breaks to be had. We take a look at why an ABN can benefit when you're looking at a new car loan.
Low doc car loans
If you've ever applied for a loan, you'll appreciate why this one's so good. The amount of paper work involved is intense. As a self-employed person, it may not be available to find. For instance, you may not have pay slips or a tax return yet. Or perhaps your income fluctuates because of the nature of your business. With a low doc car loan, none of that matters. Your income can be assessed using alternative methods, such as how you manage your bank accounts.
Now of course, nothing in life is free and generally with these types of loans, the interest rate can be a little higher. However, it can be a step in the right direction to help build your credit rating and improve your chances of securing a loan in the future.
If you plan to use the car for your business 50% of the time (or more), then you can apply for something called a Chattel Mortgage. The loan is secured using the vehicle you intend to purchase. As the buyer, you own the vehicle from the beginning and once you've paid it, the mortgage is removed – a bit like a traditional mortgage. The benefits to this are the rate is usually lower than a consumer loan, plus GST, depreciation, and interest can be claimed back.
Claim a $20,000 instant asset write-off
Great news! The Government decided to give small businesses a break in 2015 and will continue to do so until 30 June 2018. This means that small businesses (so those with an ABN) can deduct up to $20,000 from their tax return upfront. So, if you were to purchase a car worth no more than $20,000 with an ABN, you'd be able to claim the full purchase price for it. Your business turnover needs to be less than $2 million.