Things To Consider When you’re thinking about Upgrading your Equipment Or Premises

Your business is growing and pushing at the seams, so you’re thinking about investing to increase your capacity. Whether you are looking at new equipment, business vehicles or expanded premises, here are some things to consider before you take the next step.

Is this the right time to invest?

The first thing to consider is the timing of your business expansion. Are you sure the market will support the extra turnover you envisage? Is this the right time to get the best deal on purchases or upgrades?

The answers will have as much to do with market forces as the strength of your business. 

If prices and business loan interest rates are low, then you may be more confident about taking out finance to grow. Or there may be seasonal reasons to make purchases at a certain time, such as when demand is low and prices may be trimmed.

How can I make the most of tax time for business purchases?

Your tax professional should be able to confirm all the details of what you can claim for, how much you can claim, and how to claim – some of which varies according to your business structure and turnover. 

Upgrading your business equipment, vehicles or premises can be complex, as can the tax implications associated with the route you take. So, it’s a good idea to talk to your accountant, lawyer and business banker about what would be the best option for your business.

How do the costs of upgrading weigh up against the benefits?

You’ll have to crunch some numbers and consider both sides of the ledger when making this assessment.     

Equipment and vehicles     

Questions to ask yourself include:

• What increases in sales, production and, most importantly, profits, will your new investment give you over the year(s)?      
• How much depreciation and interest will you be able to claim on the new equipment?
• How much do you estimate you’ll receive from selling existing equipment?

Balance your answers against other factors such as:

• The costs of outright purchase, lease repayments or interest on loans.
• The repair costs you have incurred with the current equipment or vehicles, and how much you would have to put aside to cover increasing costs in the future if you don’t replace them.
• The time and money that breakdowns and repairs currently cost you.

You may wish to seek professional advice as you weigh up the pros and cons of investing in new equipment or vehicles.

Premises and location

Questions to ask yourself include:

• What increases in sales, productivity or customer experience could a premises upgrade bring over time?
• How much do you estimate you’ll receive from selling or exiting your current property?

Balance your answers against:

• The profit potentially being held back by being in smaller or less functional business premises.
• The upfront costs of relocation or renovation.
• Long-term lease commitments or interest on property loans.

You may wish to seek professional advice as you weigh up the pros and cons of investing in upgraded premises.

What funding options might suit me and my business best?

Vehicle and Equipment Finance

A business equipment loan or business car loan can help you own vehicles and equipment from the get-go without needing to pay the purchase price upfront. This type of business finance could help smooth out your cash flow via monthly repayments over an agreed period.

In common with hire purchasing, you may be able to depreciate the assets you purchase, claim the GST, and claim loan interest payments as tax deductions.

You may wish to talk to a Westpac specialist about your options for vehicle and equipment finance.

Business loan

A business loan is a lump sum of money that’s loaned to your business with a predictable repayment structure and may be suitable if you require funding for things such as capital investment, property acquisition or development, or for refinancing other lending.

If you're considering expanding your business footprint—whether that means moving to a larger site, opening a second location, or renovating your existing premises—a Westpac business loan could provide the funding support you need. 

Tailored for small to medium businesses, these loans can help cover the upfront costs of fit-outs, refurbishments, or even purchasing new commercial property. With flexible repayment options and dedicated support from Westpac business bankers, you can access the financial tools to grow your operations with confidence.

Business overdraft

Ideal for smaller, emergency purchases and to cover shortfalls in cash, business overdrafts provide quick access to additional funds up to an approved amount. Attached to your business transaction account, it may help relieve strain on cash flow by providing funds to cover expenses, such as paying invoices and wages, until your business gets paid by its customers.

Would hire purchase or leasing my new vehicles and equipment provide more flexibility?

For a flexible solution that could suit your cash flow, you may wish to consider obtaining vehicles through hire purchase or leasing. The main differences are that:

• With leasing, ownership remains with the financier, though you can ask if you can purchase the vehicle or equipment at the end of the lease. Leasing payments could be tax deductible, and if eligible, you might be able to claim back the GST too. 
• With hire purchase, regular repayments are made, and the ownership reverts to you at the end of the contracted period. Depending on your personal circumstances, you may be able to claim depreciation of the asset and interest payments as tax deductions, and you might be able to claim back GST upfront.

You can learn more about the GST implications of hire purchase and leasing on the ATO’s website.