9 ... nt offers t w r 31 200 e n m ern ckage tme Ne be Gov s Pa ves nce one Decem lu In r imu Money Matters We talk with Mark O’Donoghue from charter boat finance specialists, Finlease Australia to get clarity on the government’s 30% tax deduction investment allowance, plus other financial considerations regarding charter boat investments. As part of the $42 billion dollar incentive program being rolled out by the government, they have put place an investment allowance for the acquisition of business related assets. Up to 50% investment allowance is provided and from what we can see, providing charter boats are meeting the compliance requirements set down by the ATO as being a legitimate business as opposed to an enterprise, this 50% investment allowance will be allowable for charter boats. In fact in the explanatory memorandum, they showed two examples of where boats s were involved in that exact circumstance. What any potential buyer will need to know is that there is a very small window of opportunity, because there are now very few vacancies in Whitsunday Charter fleets for new boats, despite the deadline for orders now being December 31, 2009 and operational by December 31, 2010. So if you have a $500,000 boat excluding GST, than the investment allowance is $250,000. It is a tax deduction, its not some form of rebate or grant, it’s simply an additional tax deduction over and above the depreciation. I think the best way of looking at it is that it is just a one off tax deduction of 50% that is claimed up front. It is our understanding, that the deduction can be claimed in one year, but if it results in a level of expenses which exceeds the revenue, including other revenues from other sources, they can certainly carry forward that loss. be funded by the client, be it cash or perhaps a redraw facility on their property property. Can GST be claimed? Absolutely. When the boat is a business related asset and acquired by individuals, the individual will need to set up an ABN, as there will be incomes coming in and expenses going out where they will have GST inputs and outputs and providing they are running a business there is the initial input opportunity for GST on the purchase price of the boat which may be say $50,000 or $60,000 depending on the cost of the boat, and that is an input credit available. What’s a common ratio of debt on a charter boat? The common ratio that we see in the Whitsundays gears the boat at around 70% debt on the GST excluded price of the boat. So 30% would What commercial interest rates are available? Today we are financing charter boats on a typical structure which is usually a five year term with a 40% balloon at the end, and then we regularly refinance that balloon for the client. At the moment you would be looking at interest rates in the low 7’s, fixed rate funding for 5 years, which is at its historically low base. Now that might come down a little more. For further information, or business model spreadsheet examples, contact Mark O’Donoghue from Finlease Australia on 1800 358 658 or [email protected] Seawind & Finlease recommend to seek independent advice from your accountant or financial planner. What further depreciation can be claimed? In essence, you can claim up to 30% depreciation (diminishing value), provided that the client actively enters into the Simplified Tax System. In the first year it is only 15% as it is considered a half year, and then 30% each year after this. % llowaed befo A Order 50% once off Government incentive tax deduction Must be ordered by Dec 30, 2009 / and operational by Dec 30, 2010 Normal depreciation applies - up to 30% per annum diminishing value Historically Low Interest Rates Limited Vacancies with Charter Fleets KEVIN CHARTER HEAVEN UNPRECEDENTED FINANCIAL INCENTIVES TO INVEST IN A NEW CHARTER BOAT NOW! AS PART OF THE 2009 BUDGET, the Federal Government is offering a ONCE ONLY 50% INVESTMENT ALLOWANCE (Increased from 30% initially announced) against the purchase of a new Charter Boat. Together with strong demand yet limited vacancies for Seawinds amongst charter fleets and historically low interest rates, there has never been a better time to realize the charter boat dream. THOUGH THE DEADLINE TO ORDER IS NOW DECEMBER 31, 2009, THERE ARE VERY FEW VACANCIES WITHIN CHARTER COMPANIES. SEAWIND CAN HELP PLACE YOUR BOAT INTO CHARTER IF YOU ACT SOON. In this feature, we investigate these benefits in detail and talk with experts in the industry including: A Multiple Charter Boat Owner; The Whitsunday’s Largest Charter Operator; and Australia’s leading Charter Boat Financier. Why buy a charter boat? For many people, investing in a charter boat can be a fantastic way of realizing the dream of owning a luxury cruising catamaran much sooner than would normally be possible. For those who aspire to go island hopping along the east coast of Australia or through the Pacific and beyond, this dream often seems just out of reach, whether being held back by work commitments, family commitments or just a plain lack of time and money to go ahead and make it happen. “Charter Boat Ownership can Make it Happen” Placing a boat into charter however can ‘make it happen’ much earlier by taking a different approach to boat ownership and treating it more like a lifestyle business. Rather than approaching boat ownership as a second home on the water, or as a hobby or floating toy, charter boat owners would view their boat as say, a rental holiday apartment…that is, rather Full interviews, investment guide & spreadsheets available online at www.seawindcats.com or call 02-4285 9985 or email [email protected] than being in the liability column, it is placed into the asset column, because it now becomes an ‘income producing asset’. To get a better insight from a charter boat owner, we talk with Chris Benning, a long time Seawind customer who has now owned 3 x Seawind charter boats (Seawind 1000, Seawind Venturer 38 & now a Seawind 1160) and was a senior manager in one of the big 4 Australian banks. Chris explains why he opted for charter boat ownership, “We had a yacht in Sydney, but we seemed to spend more time and money working on it than sailing it.” “It seemed to be a poor investment in both time and money. It seems smarter to have a boat paying for itself. We can still use it for 4 or 5 weeks a year which is about what most people use their boats in Sydney Harbour”. “And at the end of 5 years you’ve basically got a boat that you can either upgrade or keep as a personal boat.” The former of the two is exactly what Chris did and is a great example of what you can do over time to get to your dream boat, starting smaller and working up the ladder of boats. Then, instead of being up for “Clawback” (similar to Capital Gains Tax) when the older. . . Continued Full interviews, investment guide & spreadsheets available online at www.seawindcats.com or call 02-4285 9985 or email [email protected]