As we head towards the end of the financial year (EOFY), we’re being bombarded with ads tempting us to spend big on EOFY purchases. Some savvy marketers have even turned EOFY into a word (rather than saying each letter) and coming up with (annoyingly) catchy jingles.

But not all EOFY purchases are created equal.

Even if you have some spare funds or your accountant is encouraging you to spend, you need to think seriously about what you’re buying.

I’m not an accountant or tax expert. But I have years of experience, as a financial counsellor, in my business and as an agribusiness broker.

EOFY purchases aren’t just about reducing your tax. The right purchases can enhance your business, while the wrong purchases can have a negative impact on your future success.

So in this blog, I’m sharing my thoughts about the good, the bad and the ugly of EOFY spending. But this isn’t financial advice. Every business is different and you should talk to your accountant or trusted advisor to understand your position and the actual financial benefit you’ll receive.

Good purchases to consider

Let’s start with good EOFY purchases. These are purchases that do more than simply reduce your tax.

Good EOFY spending:

• Offers tax advantages
• Improves efficiency on your farm or in your agribusiness
• Supports sustainability
• Increases profitability.

1. Energy-efficient equipment

Replacing old equipment with new equipment that is more energy efficient may reduce your long-term energy costs. And depending on what you’re buying, you might be able to access incentives and other benefits.

For example: Some banks offer interest rate discounts (CBA 0.5% on qualifying assets up to $250k) on finance for green equipment including solar panels for pumps and buildings and fuel-efficient tractors.

2. Livestock

Adding or replacing livestock to improve herd quality or to expand production can be a sensible investment, especially if prices are low. You’re unlikely to buy livestock for the sake of it, but if your forward plans include stock purchases, and the price is right, EOFY may be the time to do it.

3. Maintenance and Repairs

Obviously, it’s never a good idea to put off repairs and maintenance as you could get caught without working machinery. But it’s easy to get busy and put these things off. So EOFY can be a good time to get up to date and make sure your equipment is ready to go for the next season.

4. Technology

Technology can be a good purchase if it meets the criteria I outlined above. But if you’re buying new tech just because you’ve got spare cash or because your neighbour has something new, it’s not really a wise investment.

As with any purchase, you need to do your research and ask yourself some questions.

Is the equipment that much better than what I have now?

Are the extra ‘bells and whistles’ really worth it?

Some tech purchases that might fit the bill include GPS, drones, or agricultural software for better field data management, crop scouting and precise application of products.

5. Crop Seeds and Fertilisers

Purchasing inputs for the next season may help you secure better prices and ensure availability. But don’t overbuy and only buy if you’re clear on what your plans are.

6. Training and Education

Staying up to date and upskilling yourself and your staff can be an excellent investment if it helps you improve your business or agricultural practices. But before you spend on training for the sake of it, have a clear idea of where your skills gaps are.

• What skills are you missing?
• Do you (or your staff) have the time and motivation to complete the training?
• Would it be better to outsource those tasks to someone rather than trying to upskill?

7. Storage Facilities

Enhancing or expanding storage facilities to reduce losses and dependency on external storage services.

Bad purchases

Bad purchases are the ones that don’t provide immediate benefits or where you can’t justify spending on these things right now. They might also include EOFY purchases you make without considering the impact on cash flow or alignment with business goals and strategies.

1. Outdated Technology and Equipment

Investing in technology or machinery that is likely to become obsolete quickly because of advancements in the industry. Remember, businesses marketing at the end of the financial year are trying to move stock on hand. Would it be worth waiting for the new model? You’ll still get the benefits next year.

2. Non-Essential Farm Equipment & Vehicles

Vehicles or equipment that offer more in terms of luxury rather than functional improvements to the business. Do you really need a new car or ute? And yes, that new piece of machinery might look all shiny and new, but will it deliver more than your existing equipment?

And finally, ugly purchases

These are decisions that might significantly harm your financial stability or create operational inefficiencies in the long run.

1. Overspending on Quick Depreciating Assets

Large investments in assets that lose value rapidly and don’t contribute effectively to production or operation.

2. Impulse Purchases Driven by Tax Breaks

Purchasing just for the tax write-off without considering the actual need or ROI of the equipment or asset. And despite the marketing spiel, you’re not getting $100 back for every $100 you spend.

3. Expansion Without Research

EOFY is not the time to make rash decisions about expansion if you haven’t done your research to understand market conditions. Making decisions because you think you’re reducing tax or getting a good EOFY deal could cause significant financial loss down the track.

4. High-Interest Loans

EOFY purchases that involve high-interest debt not only affect future cash flow, but you might actually end up spending more in the long run.

My tips for savvy EOFY spending

If you want to make the most of any EOFY spending, you need to:

• Speak to your accountant to understand where the tax benefits might be.
• Speak with your farm advisor to understand long term implications of EOFY spending
• Look at your forward plans and see what you might need.
• Review your equipment register and replacement plans.

Over to you

Were you thinking about some end-of-year purchases? Even if they look like they’re in the good category, you should still consider long term impacts of your decisions.  

If you’d like some help, please get in touch. If you have any comments and questions, I’d also love to hear from you. And, if you liked this article, I’d love you to share it.