How To Use Business Loans Or Lines Of Credit To Reduce Your Business’s Taxable Income This EOFY
The End of Financial Year 2024 is rapidly approaching. It’s time for small businesses owners to take advantage of any tax incentives before June 30 by leveraging EOFY business loans.
The Australian Taxation Office (ATO) usually offers many tax incentives, which could help reduce your business’s taxable income.
If you need extra funds in this critical time, EOFY business loans could be the best financing option. They can help you make strategic investments to maximise your tax deductions while managing cash flow.
In this blog post, we will discuss how to use small business loans or lines of credit effectively to reduce your business’s taxable income.
EOFY Business Loans
The best business loans to use during EOFY are those that provide flexibility and constant access to funds so you can use the extra cash for any business purpose.
These loans could help you manage cash flow, invest in stock for EOFY campaigns, cover marketing costs, and even make strategic business asset purchases to take advantage of tax incentives.
Small Business Loan With Benefits
What are small business loans?
During the critical time when you need a quick cash injection, you may want to take out a small business loan.
Small business loans are designed with flexibility in mind. Small businesses can benefit from adjustable repayment terms and customised loan amounts.
The collateral requirements are not as strict when you apply with online lenders. These capital requirements usually align with your business situation and ease the financial challenges often faced by small firms.
By taking out these loans, you can receive the financial support needed to overcome obstacles, and use the funds to achieve your business goals.
What are the benefits that come with a small business loan?
At Lumi, we offer bespoke lending solutions for your unique business needs. Our Small Business Loan could offer you utmost flexibility with special add-on features.
By taking out a small business loan with us, you could apply for Rate Ease™, Australia’s first rate-reducing business loan. It will automatically drop your rate every month if you make timely repayments.
Additionally, there is a Payment Pause. This product allows you to pause your repayments for 4 weeks without interest whenever you need it.
Moreover, you could take advantage of 6-Week Payment Holiday with Lumi this EOFY. This flexible finance option allows you to potentially take a break from your repayments of up to 6 weeks at the start of your new loan.
Lumi Small Business Loan with benefits allows you to customise your loan to suit your unique needs. You can use the extra money with flexible repayments to keep the cash flowing while you grow your business and invest in tax deductible assets.
Game-Changing Line Of Credit
How does a line of credit work?
Similar to a business credit card, you can get access to a credit limit to spend when needed.
You can borrow as much or little as you need.
The best part is that you only have to pay interest on the money you’ve used. You don’t have to pay any fees for the unused credit.
However, some lenders might ask you to re-apply when your line of credit expires to continue using the credit.
However, you don’t need to repeat the application process and reuse the same terms and approved limit if you have a revolving line of credit.
What is a Lumi game-changing Line Of Credit?
With Lumi’s improved, low-fee Line Of Credit, you can get flexible access to revolving capital from $5,000 and $500,000.
You don’t need to pay ongoing fees, which makes the Lumi Line Of Credit a more affordable option for most businesses.
It also offers small business owners up to five-year repayment schedule.
Unlike traditional loans that come with rigid borrowing terms and fixed repayment schedules, this product provides you with money-on-demand with agility and convenience.
This means that you can have constant access to cash and withdraw funds as needed to meet various needs this EOFY.
The Lumi Line Of Credit ensures cost-effectiveness and transparency. Thus, you can have ample time to achieve your goals with the extra funds and repay the borrowed amount without undue pressure.
How To Use EOFY Business Loans Effectively
Apply for a realistic loan amount
It’s important to understand and thoroughly assess your financial status. Carefully analyse balance sheets, income statements, and cash flow forecasts could significantly help you determine the funding you need.
Explore different lenders and loan products to find the best option for your business. Considerations of interest rates, associated fees, repayment terms of each loan should be taken seriously.
Borrow wisely
Be wary of using borrowed funds for unnecessary expenses or speculative investments.
Instead, you can benefit from focusing on areas that will generate revenue or improve efficiency of the business.
You could create detailed projections of your upcoming spending to ensure you have enough funds to cover all necessary expenses.
Use the loan to bridge cash flow gaps and continue operating your business smoothly. For instance, a line of credit can help seasonal businesses manage off-peak periods without financial strain.
Use funds strategically
Ensure critical obligations, such as payroll, utilities, supplier payments, are met. This could help your business run smoothly and maintain your credibility.
Then, you can start thinking about making strategic investment in growth opportunities, or maximising your tax deductions this EOFY.
However, it’s important to make sure that these investments align with your business goals and strategy.
Constantly monitor and review your cash flow to ensure the loans are used effectively. This helps you track how the funds are used and whether they achieve the intended outcomes.
Plan your repayments
Create a detailed repayment plan and include regular reviews of this plan to make sure it is feasible.
You could allocate an amount of your revenue towards loan repayment each month. To avoid missing payments, you could set this portion as a fixed expense in your business budget.
You could also consider refinancing your loan if your situation changes or a better loan becomes available.
Maintain communication with lenders and discuss with them if any difficulties arises with meeting repayments deadline to find possible solutions.
By borrowing a realistic loan amount, having clear strategies to use the funds and pay back the loan, you can confidently use EOFY business loans to support your financial goals before the new financial year while maintaining financial stability.
Ways To Reduce Your Taxable Income This EOFY
Invest in tax-deductible assets
For this EOFY, your businesses could take advantage of the Instant Asset Write-Off.
If your annual turnover is less than $10 million, you can immediately deduct the full cost of eligible assets costing less than $20.000.
You can apply this incentive to multiple assets, as long as the cost of each asset is less than the $20,000 threshold.
You can claim tax deductions for assets that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
However, you might need to apply the simplified depreciation rules to claim the instant asset write-off. It cannot be used for assets that are excluded from those rules.
If you need extra funds to purchase tax-deductible assets before the end of this financial year, EOFY business loans could offer you a handy solution.
Moreover, as part of your job, there will be some work-related expenses that you can claim as tax deductions.
This could be machinery and equipment, tools, educational courses for professional development, costs for uniforms… If you work from home, you might even be able to claim home office expenses.
If you decide to claim these expenses during tax filing, it’s crucial to keep accurate records throughout the year.
Utilise government incentives
Generally, to support specific groups or encourage certain behaviours of taxpayers, governments often provide tax incentives.
Some examples may be first-home buyer grants, deductions for green and environmental initiatives, or low-income tax offset for those earning below a threshold.
It is critical to stay up to date about available incentives. Understanding which benefits you are eligible for could significantly reduce your tax liability.
This year, there is a wide variety of concessions available for small businesses based on their annual turnover. Sole traders, partnerships, companies, and trusts are among those that can be considered eligible.
You might be able to access:
- Small business CGT concessions if your turnover is less than $2 million
- Small business income tax offset if your turnover is less than $5 million
- Small business restructure roll-over if your turnover is less than $10 million
However, most small business tax incentives have other requirements besides aggregated turnover.
So, it is important that you check your eligibility before you apply. Conditions for these concessions could change each year.
Conclusion
During the critical time of EOFY, managing cash flow while claiming tax deductions might be the main goals of some small businesses.
This could help reduce your taxable business income before the financial year 2025.
To make such strategic investments, it is important to have access to the right financing options.
EOFY business loans such as small business loans and lines of credit could provide the ultimate solutions for businesses to use the extra money with flexibility and convenience.
