Do You Own Assets in Your Business; and have a Home Loan? Financing Business Assets Can Save You Money 🤑

Presidio Group
Aug 8, 2017 · 4 min read

If you have answered Yes to that simple question, we usually find that there are a bunch of ways to produce better results, long-term, with only a few simple changes.

Let’s have a look at a recent business client, Steve’s, situation:-

Steve owns an LED lighting business. The business is relatively new, at 3 years old; though growing, and healthy. Steve owns a property in the inner circle of Brisbane and owes approximately $500,000 on the home loan. Steve is comfortably paying down the mortgage, and everything is ticking along fine.

So — no real emergencies. Steve sat with us to chat about re-financing his home loan — a Progress Meeting, just to review his position; and available at your request.

After reviewing Personal & Business Balance Sheets, the following was uncovered:

· Steve owned 3 vehicles in his personal name, that the business claimed expenses for, but were owned outright.

· Steve also had personally contributed $180,000 into the business, which was represented by a loan on the balance sheet back to Steve.

Why is this of interest?

The 3 cars’ total value was approximately $100,000. These were unfinanced but paid for in cash, by Steve. We suggested: rather than just claiming the tax benefits; that Steve actually sell the cars to the business, and create $100,000 debt (finance in the business name).

The $180,000 loan back to Steve is just a paper entry on the balance sheet — we suggested to convert this to bank debt also.

Why?

By implementing these two simple actions, this is what happens to Steve’s debt.

1. A loan to the business of total $280,000 is made ($180,000 for the business balance sheet item + $100,000 for the cars).

2. This then is used to reduce Steve’s home loan from $500,000 to $220,000.

The end result = one loan split of $220,000 (home loan) and one of $280,000 (for business investment).

This is the exact same amount of debt we started with right?

So what’s the difference?

By funding-out assets and business balance sheet items, we have effectively split the current debt into 2 portions — the only difference is, we now have a $280,000 loan split that is tax-deductible. In terms of tax savings, this equates to approximately $12,000-$14,000 per annum. On top of this, savings on the debt package equated to $5,000 per year.

So by re-structuring/funding-out business assets, Steve stands to save tens of thousands 🤑 over the years — all with the same amount of debt that Steve originally had. No more stress — more savings; and less money to tax!

Shayne Cook, Business Development Manager

Ph 07 3391 7055

E admin@presidiofc.com.au

Presidio Finance Consulting, Level 1, 32 Logan Rd, Woolloongabba Qld 4102 PO Box 1186, Coorparoo DC Q 4151

W www.presidiogroup.com.au

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Presidio Finance Consulting Pty Ltd (ABN 51 128 973 508) is a Full Member of the Mortgage & Finance Association of Australia (MFAA) and holds an Australian Credit Licence number, 391109. Rates are supplied by various lenders and mortgage managers. Connective and Presidio Finance Consulting Pty Ltd takes no further responsibility for their accuracy. All rates are indicative annual rates only, and are subject to change without notice. Rates for residential loans only. Nothing in this sheet states or implies that any credit is available. Other fees and charges may apply. Unless specifically indicated, this email does not constitute formal advice or commitment by the sender of Presidio Finance Consulting Pty Ltd. This advice may not be suitable to you because it contains general advice that has not been tailored to your personal circumstances. Please seek personal financial and tax and/or legal advice prior to acting on this information.

As always, we would be very happy to assist any of your family, friends or colleagues with their home or investment loans — please send them to us for a no-obligation consultation.

Presidio Group

Written by

Specialist Financial Services and Lending Provider. We provide quality advice and proactive solutions for businesses and their owners.

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