Time to upgrade
Thanks to beneficial government tax incentives, there’s never been a better time for veterinarians to upgrade their equipment.
Over the past 12 months, veterinarians have had to contend with COVID-19, lockdowns, staff shortages, bushfires, droughts and floods. For those vets wondering if now is a good time to buy or upgrade equipment, it may be a surprise to hear that the answer may be an unequivocal ‘yes’.
“We are fast approaching the end of the financial year and there are tax bills that will be calculated,” says Colin Taylor, Financial Consultant at BOQ Specialist. Colin has spent the past nine years working exclusively with healthcare professionals and has a special interest in veterinary practices. “At the moment, there are very beneficial government incentives and stimulus related to asset write-offs. This means that upgrading equipment can lead to a nice tax deduction this year, rather than over a number of years. Of course, you should never do anything simply for a tax deduction and you should always seek accounting advice, but it’s a good way to potentially reduce your tax liability this financial year.”
The COVID effect
In Australia, pets have loved COVID-19 and the mandated lockdowns. They have their owners working from home and are getting more attention than ever before. This also translates to more visits to the vet for a check-up, to investigate a discovered condition, or to finally make a booking for a long-delayed procedure.
“Dentals have been a growth area in veterinary practices but some vets dislike doing them,” says Colin. “If you’re still using old techniques, it could be time to upgrade to new technology. The current dental units make the procedure faster, easier and have a quick patient turnaround. Not only will it improve efficiency but I’ve seen vets go from hating the task to loving it. All that coupled with the current government incentives and stimulus measures could make now a good time to buy.”
At present, some practices are having trouble attracting veterinarians to join their team, resulting in long hours and lack of holidays for the owners. Many professionals believe old technology can be an obstacle to them doing their job in a professional manner.
“If you’re struggling to get staff, upgrading equipment can attract employees and create an opportunity to increase revenue,” says Colin.
One of the unexpected benefits of COVID-19 lockdowns has been the increase in business at veterinary practices. This has resulted in many practices having a good financial year—and therefore a higher tax bill than any previous year. An effective way to offset that cost is through equipment purchases, whether you pay cash upfront or finance it over a period of time.
“The most common way to finance equipment purchases is a chattel mortgage,” says Colin. “You own the asset from day one, you claim back the GST and, in previous years, it would depreciate over the life cycle of the asset. With these current government incentives, the asset can be written off fully in this financial year rather than depreciated over a number of years. For practices that have had a good year with a lot of cash on hand, you may even consider buying the asset outright.”
Digital technology has seen veterinary equipment advance in leaps and bounds. It’s not cheap to purchase, but the saving in time and efficiency plus the increase in the quality of clinical work makes it very desirable. Any practice that has moved from an old X-ray unit to a new digital scanner knows how dramatic that improvement can be. New equipment is also invariably used more frequently than old technology.
Upgrading equipment and embracing new technology has definite advantages. That’s not to say that the decision should be made without considered financial advice.
“You should never buy something for the sake of buying something,” says Colin. “You need to look at the numbers and see what revenue or savings it will generate for the business vs the repayments. The answer to buy or not should become obvious.”
Similarly, not upgrading equipment and using it to the end of its life cycle is usually a false economy, according to Colin. “If you’re considering selling your practice, old equipment is not attractive to prospective buyers and you are forgoing the advantages of the depreciation, clinical advantages and potential increase in profits.
The right advice
If you’re considering purchasing new equipment, the first step is to speak to your accountant. They will understand your financial situation and upcoming tax payments based on the financial year’s revenue. They will also be able to advise on the tax benefits in relation to your financial situation.
“Right now, the tax benefits can really work in a practice owner’s favour,” says Colin. “Purchasing a big-ticket item that say costs $100,000 can be instantly written off this year, rather than over a number of years. That’s $100,000 off this year’s taxable income. It obviously adds an incentive and advantage, especially if you’re in a higher tax bracket. As we’re never sure what the government is going to do in the next financial year, so now is certainly a great time to consider buying.”
To find out more ways BOQ Specialist can help you at the end of the financial year, contact one of their financial specialists today on 1300 160 160 or visit our website at boqspecialist.com.au/eofy to learn about their EOFY offer.
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