By Phil Ringuet
Over the past fortnight we have seen a number of changes to the lending environment.
These changes have been suggested to improve business and consumer access to credit, which is hoped will be spent in sectors such as housing, construction and retail.
Below are some key examples of changes and we would encourage you to reach out if you have any questions or require assistance in accessing these offers.
Instant asset write off
In handing down the federal budget, treasurer Josh Frydenberg announced an expansion of the Instant Asset Write Off Scheme (IAWO) which previously allowed business with a turnover of <$50m to immediately depreciate the value of assets used for business purposes up to the value of $150,000 which are first used or installed before Dec 30, 2020.
Post budget the new “immediate expensing” scheme applies to business with an annual turnover of up to $5 billion. There is no ceiling on the price of assets purchased for work purposes new and used, and the revised scheme will remain in operation all the way through to June 2022.
In his speech on October 6, the treasurer described the new parameters for the IAWO as “a game-changer” that would “unlock investment” and “dramatically expand the productive capacity of the nation and create tens of thousands of jobs”.
Examples of assets can include;
- Trucks and motor vehicles
- Medical equipment
- Yellow goods and machinery
SME guarantee 2.0
The Federal Government recently announced the Coronavirus SME Guarantee Scheme 2.0.
This scheme broadens the acceptable loan purposes beyond access to working capital – meaning businesses can take advantage of opportunities to grow their businesses as the economy recovers. Lending limits have also been raised from $250,000 to $1,000,000 and can be utilised in both secured and unsecured arrangements.
Qualifying loan purposes have been expanded to include the following:
- Access to working capital
- Capital expenditure
- Business acquisition
- Commercial property purchase (owner-occupied only).
Assessment of the loans is streamlined to improve speed to market and successful applicants will generally be able to demonstrate servicing utilising either business activity statements, bank statements or accountant-prepared financial statements for the prevailing 12 months. Each lender will have a different approach but the business should be able to demonstrate the ability to repay and that their conduct and ATO obligations are managed within their arrangements.
Responsible lending – RLO
Changes to responsible lending legislation have been put forward as part of the federal budget and will look to replace cumbersome guidelines which have impacted both borrower’s ability to access credit and banks to deliver it.
The reforms will have an impact on Australians’ ability to access credit for products such as home loans, credit cards and business loans. The changes will be aimed at reducing the requirements on banks such as perusing through bank statements in order to determine conduct and living expenses, most of which are discretionary anyway.
These reforms are currently under review and proposed to take shape in 2021.
Home builder grant
If you have recently qualified for the Home Builder Grant we have recently received confirmation that a number of banks will now allow utilisation of the grant as funds to complete your acquisition (deposit).
This is an important change as this may reduce your loan to value ratio (LVR). For borrowers who may have been borrowing above 80% of the value of their property, this could either reduce or remove entirely the requirement for mortgage insurance (LMI).
An Important Message
While every effort has been made to provide valuable, useful information in this publication, this firm and any related suppliers or associated companies accept no responsibility or any form of liability from reliance upon or use of its contents. Any suggestions should be considered carefully within your own particular circumstances, as they are intended as general information only.