Businesses turn to loans to take advantage of instant tax deduction
Lenders are advertising and businesses are more than ready to apply as the end of financial year looms.
Online business lenders such as OnDeck have been advertising loans targeted towards small business owners in the lead-up to the end of financial year (EOFY). The ads are targeted towards those looking to take advantage of an instant tax deduction scheme, which allows small businesses to instantly claim tax on items up to $20,000. The scheme was available to small businesses with an ABN earning and less than $2 million per year.
In the lead-up to last year's EOFY sales, retailers reported increased sales due to the scheme. However, Australian Retailers Association executive director Russell Zimmerman hadn't heard the same buzz this year, according to The Sydney Morning Herald.
Loan applications to OnDeck, on the other hand, have been strong. The online business lender offers loans up to $150,000 for terms between six and 24 months.
While this may be an indication of businesses looking to tax advantage of the EOFY tax benefits, small business applications to fintech lenders such as OnDeck have reported phenomenal growth recently.
Non-bank business lenders have received more than $1.1 billion of loan applications every month according to a survey by online business lending aggregator eBroker. The survey also found that non-banks attracted at least 11,676 loan applications per month.
Among the most common loan purposes were to purchase inventory, as well as working capital and capital purchases. The average loan size was $95,104, which falls well outside the constraints of the instant tax deduction scheme.
This year, it's not only small businesses that can take advantage of the instant tax deduction scheme. From 1 July 2016 Scott Morrison has extended the scheme to allow businesses with turnover of up to $10 million to take advantage as well.