Calling All Tradies....(finace Questions)

[groper]

sorry for the double, but this one is easier to read than the first!!! MODS DELETE THE ABOVE!

dude its easy, whatever you spend on your business comes off your taxable income. so, if your earning 80k profit after costs, and you spend an extra 10k on costs (lets say depreciation on a work vehicle) then the tax youll have to pay will be 70k X whatever tax rate the ato has given you. Otherwise, youd have to pay 80k X whatever tax rate ato has given you.

Then to simplify this even further, you can work out how much less tax you will actually pay (by spending money on a car for example) multiply the costs (depreciation etc) by the tax rate you have been given.

so, for example ill show you what I did. I bought new $40k BF2 ute and my income tax rate is 20%.

1. claim $4k straight up GST...

2. depreciation on new car is 22% in first year. so that's .22 X $40k = $8800

3. income tax alone saved in first year due to depreciation alone = (income tax rate X claimed depreciation) = .2 X $8800 = $1760

there is other things you need to claim aswell, for example you can claim any interest payable on any borrowed money, running costs etc... lets say I work it all out and I can claim approx $15k due to depreciation, interest and everything else. The tax money I save will be 20% of $15k or $3k. add to this $4k in GST and ive saved myself $7k in tax. Mind you ive spent $40k on the car + interest so I havent really saved anything, but its 7k towards a nice car to drive 7 days a week and tow the boat around etc worth it for me

with your descision, you work all this out the same way as above. once you have totalled it all up, you do it all again with a different set of figures for whatever other vehicle your considering and compare the 2 bottom lines. Get it? then you decide if its worth it...

You will always have less money in your pocket at the end of the day the more expensive the vehicle is, how much difference is the key in deciding whether or not you want to spoil yoursself or not

Edited 07/05/07 10:35 AM by groper

[Dagabond]

sorry for the double, but this one is easier to read than the first!!! MODS DELETE THE ABOVE!

Where's the PLEASE!!

Lot of good info in here:

http://www.fordxr6turbo.com/forum/index.php?showtopic=17497

Look for Ben aka Ford Grunt's post's.

Although it relates more to noveating than hire purchase...

[tab]

Good post Groper

The biggest misconception is that a business expense is a direct tax write-off/deduction, but this couldn’t be further from the truth. It’s merely a reduction in profit, which in turn is a reduction in the amount of tax you’re paying.

[cooltint]

Good post Groper

The biggest misconception is that a business expense is a direct tax write-off/deduction, but this couldn’t be further from the truth. It’s merely a reduction in profit, which in turn is a reduction in the amount of tax you’re paying.

I agree good post groper. We save about $8-10,000 every time we buy a new car. It's got something to do with the way our company tax is set up. We're on the STS (simplified taxation system). We can claim 30% first year then 20% following years. Not sure how it all works but it allows me to buy a new car every 2-3 years so I'm happy.

Big AL

Edited 08/05/07 03:29 AM by cooltint

[XR6T8080]

It all depends if your registered for GST, and how much profit your tax return is, I.e. if your GST registered you'll be over $50,000 so you either buy the new one, or give the money to the government.

If your under $50,000 you'd be better with a second hand one, because you would be more concerned with the resale value and less concerned with the tax deduction.

that's my thought anyways, the BF is quicker too.

I'll be getting a BF - T next.

go the new one, with the ballon youd only be paying $100 odd a week wouldnt you?