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Is your medical practice ready for a new fit out? Are you using outdated medical equipment that desperately needs an upgrade? Perhaps you're ready to move to the next level and invest in the latest diagnostic or imaging technology. Whatever the reason, most medical practices will need to purchase new medical equipment from time to time. And since diagnostic, healthcare, scientific and other forms of medical equipment can be exceedingly expensive, most medical practices will look towards financing all or part of their new equipment expenditure.
When purchasing expensive medical equipment, the equipment provider may offer to help you finance the equipment. However, finance terms offered by the equipment provider may not be the best option to suit your circumstances. As with any type of business finance, it pays to shop around and compare your options before making a decision. Read on to find out about different types of medical equipment finance and how to maximise your chances of being approved.
If your medical practice has sufficient savings, it may be possible to purchase your medical equipment outright. An outright purchase offers obvious cost savings, including all fees and interest that would have been charged during the life of the loan. Additionally, medical equipment suppliers may offer a discount on the total purchase price for a cash purchase.
Your decision will also depend on the amount of cash savings held by the medical practice compared with the total cost of the equipment. Depleting your entire cash savings could leave your practice cash poor, lacking sufficient funds to navigate periods of negative cash flow and without the means to finance business growth and time-sensitive opportunities.
When purchasing equipment outright, you can claim depreciation of the equipment as a tax deduction, provided you use the equipment to generate assessable income.
The decision whether to purchase medical equipment outright will depend on your financial circumstances and you should weigh the advantages and disadvantages of other types of equipment finance.
In a finance lease or commercial hire purchase arrangement, a lender will purchase the medical equipment outright and then lease it to your business for an agreed period of time.
At the end of the agreed lease period under a finance lease arrangement, the equipment is either surrendered to the lender or can be purchased with a final balloon payment. Under a commercial hire purchase, the equipment belongs solely to the business once the final payment under the agreement has been made.
While both arrangements can appear similar, the tax implications can be vastly different. If considering a finance lease or commercial hire purchase arrangement, consult with your accountant to discuss the tax and depreciation ramifications specific to your business.
In general, ongoing repayments are tax-deductible in a finance lease arrangement, but not with a commercial hire purchase. Conversely, a commercial hire purchase arrangement will involve tax-deductible depreciation and interest.
When it comes to GST, ongoing payments pursuant to a finance lease arrangement will attract GST (which can then be claimed as a tax credit on your next Business Activity Statement), whereas a commercial hire purchase arrangement will involve a lump sum GST payment on the total cost of the equipment.
When assessing an application for a medical equipment loan, lease arrangement or commercial hire purchase, lenders will consider the following:
Ask yourself the following questions when considering how to finance the purchase of medical equipment.
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