A message from Leussink regarding COVID-19

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In the world of business, cashflow and new opportunities are on every business owner’s mind, and often cashflow can hold businesses back from seizing opportunities to pursue growth.

For some businesses, opportunities can only be taken if they already have the equipment or facilities on hand or can purchase equipment immediately in order to meet the needs of the new project. But what if there was another way?

What if you could seize an opportunity and meet contractual obligations without needing a large capital outlay to purchase equipment? What if you could have the equipment and also be able to take advantage of immediate tax benefits?

Well, you can. Leussink understands that businesses don’t have unlimited capital and purchasing the equipment needed in a workshop can be a major financial decision. With Leussink’s tailored rental options, you can have the equipment you need without the large capital outlay – and you can claim it all back on your tax. Why? Because your rental will be considered an operational expense, not a capital expense. But what does that mean exactly?

Understanding CapEx vs OpEx

CapEx (Capital Expenditure) and OpEx (Operational Expenditure) represent two categories of business expenses, each with their own business benefits. So, how do they work?

CapEx occurs when a company acquires new assets or adds long-term value to an existing asset. So, how does it work for a business?

Assets are purchased upfront and then the cost is either amortised or the depreciation (the amount of depletion on the fixed asset) is used as a tax deduction across the number of years spanning the useful life of the asset, which is typically anywhere between 5-10 years. Examples of CapEx include:

  • The purchase of fixed assets such as land, buildings and equipment;
  • Expansion of buildings;
  • The purchase of vehicles; and
  • Upgrades to equipment that would be useful beyond the current financial year.

Conversely, Operational Expenditure refers to expenses a business incurs as part of its daily operations. OpEx covers regular business expenses such as wages, leases, maintenance, repairs, and so on.

To be classified as an OpEx, the cost of the asset is paid in monthly or annual installments. And the benefits? All operating expenses are 100% tax deductible, which makes OpEx a much more attractive option for a company with limited cashflow. Examples of assets that would fall into the OpEx category include:

  • License fees;
  • Advertising costs;
  • Legal fees;
  • Telephone and other utility overheads;
  • Insurance fees;
  • Property taxes;
  • Raw materials and supplies; and
  • Leased equipment.

Rental versus purchase

Purchasing new equipment or machinery outright can at times be prohibitive for even very successful businesses. Having to produce a large upfront capital outlay can hinder other opportunities and projects a business may be working on. Funds could be tied up in multiple current projects or be set aside for upcoming projects. Or, worse yet, it could be a slow time of year where cashflow is at its lowest.

However, with Leussink’s leasing options, businesses can get the welding and fixturing capabilities they need now – while avoiding a large upfront investment. Because costs associated with leasing are considered operating expenses, you will be able to claim the total cost of the rental/leasing agreement at tax time, instead of depreciating it over a number of years. If you’re looking at ways to capitalise on new business opportunities without hindering your cashflow, speak with the experts at Leussink Engineering.

 

For a limited time only, Leussink is offering 1 month’s free rental for all new customers who sign up to a minimum six month rental agreement*, which most importantly enables you to claim the expense as OpEx. Enquire online or call us now on 02 4260 7777 for more information.

 

* Terms and conditions apply.Click Here for full offer details.