22 Jun Case Study – EOFY Expense Pre-Payment a Tax win for Borrower
Coming up to EOFY 2020, we thought we’d share an example of how we’ve helped a client with the execution of their EOFY planning and preparations they had made with their Accountant.
To be clear, we aren’t Accountants and we don’t give advice – unless you want to know the likelihood of the Brisbane Bronco’s actually winning a game this season (it’s 0 – don’t @ me…).
We do, however, know how to structure a scenario to meet the requirements of an Accountants plan. And that’s what we did in this instance.
Our client, the borrower, was holding on to a few apartments from a completed development that he had been unable to market during the COVID-19 lockdown. As you can imagine, this wasn’t the most ideal time to sell. The borrower still had holding costs to pay and a business to maintain which he did so from his own cash reserves.
Come May, it was time to Zoom with the Accountant and figure out the best way forward.
The Accountant had identified that bringing forward several of the borrowers’ larger expenses would not only be beneficial for the 2020 tax period but would net some advantageous terms for the borrower over the next 12 months.
Pre-payment of expenses can include things like:
- Loan interest repayments
- Insurances
- Marketing Expenses
- Lease/Rent payments
- Vehicle Expenses
- Subscriptions
We funded a $550k short-term loan against the unencumbered residential residual stock for a 3-month term. This provided the borrower with cash flow to replenish their reserves, and the ability to pre-pay some hefty expenses for both tax and longer-term advantage.
With the units on the market and priced appropriately, the client will use the sale of these properties to pay out the facility once the 3-month term is up.
All in all, a great result for the borrower.
The importance of sitting with your finance professionals (us included) can’t be underestimated. Your Accountant, Financial Planner and Broker each have their specialties and their specific area of focus and expertise. The end result of which is: to leave you in a stronger financial position than you were.
So, do it now, email your money team, book in to talk all things tax planning and minimisation. Work with your professionals to find out what the best strategy is for you and your situation.
As the late, great Kerry Packer once said: “If anybody in this country doesn’t minimise their tax, they’d want their head read.”
Kerry Packer on Tax Minimisation
When you have your plan in place, give us a call and we’ll help you implement it.
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