Welcome to the fifth edition of The Blueprint.
In amongst the continuing uncertainty in the world economy and the announcement of the Government’s second stimulus package, we continue to see the resilience of small business in Australia.
Those businesses that have continued to perform in these tough times are those that have quality business systems and processes in place and in this edition we discuss a number of these systems.
All feedback is welcome. Enjoy this edition of The Blueprint.
Regards,
David Carpenter
Partner
 |
Managing your business in tough times |
| Managing your business in tough times |
|
|
 |
Business risk is on the rise. With the economy set to weaken further during 2009, cash flow and debt financing problems are becoming more common for Australian businesses. The Dunn & Bradstreet Trade Payments Analysis shows businesses averaged 56.5 days to settle accounts, the highest since 2001 and an increase of four days over a twelve month period. |
Irrespective of the state of the financial economy, an old adage remains true, "failing to plan, is planning to fail!". There are different strategies for small businesses in each risk group but the most important thing to do is not to put your head in the sand and hope it will go away. You need to plan, plan, and plan some more.
What strategies should business put in place?
Cash is the fuel that keeps the business going so it is essential to concentrate on your cash flow and to keep paying your bills.
- Look at your business plan and if required revise your plan to include strategies to deal with the economic downturn. If you don't have a business plan, use the information and ideas you're gathering now as a foundation to create at least an informal plan for your business.
- Examine your budget and spending habits. Again, if you don't have a budget it is time to create a detailed cash flow budget for the next 12 months. You'll need to know how much you can spend to accomplish your objectives during the planning process.
To help you get started we have provided an example layout for you to refer to click here to view. - Monitor your budget versus actual results. If income or gross profit forecasts are below budget, you may find that you can't meet projected overheads or require additional funding.
- If you are experiencing difficulties in meeting expenses, see your accountant and discuss financing strategies.
- Prioritise creditor payments. Negotiate terms to pay others not immediately essential for the on-going business and maintain good relationships with them.
- Stringent debtor control should be put in place. Shorten repayment terms and chase debts as soon as they are overdue. Consider discounts for prompt payment.
- Consider strategies to minimise costs without detriment to your business, and to maintain or increase sales.
- Work on customer relationships and maintaining quality services or products being delivered.
Be proactive to your forward orders. For more information on how you can use forward orders to manage your business please click here.
| Investment allowance | ||
|
With the Australian economy facing the brunt of a rapidly deteriorating global economy, the Australian Government has recently announced a temporary tax break for business via an investment allowance to encourage business investment and economic activity. |
 |
Key points
- the Business Tax Break is delivered in the form of a new additional allowable deduction in the year in which an asset is installed ready for use or money on improving an existing asset is spent;
- the amount of the deduction is 30% of the cost of the item if it is acquired and installed between 13 December 2008 and 30 June 2009, or 10% of cost if it is installed between 1 July 2009 and 31 December 2010 (see table below);
- the deduction does not affect the taxpayer's depreciation or the computation of a balancing charge if the asset is sold or scrapped;
- the Business Tax Break is only available for expenditure on tangible depreciating assets (including cars) which qualify for depreciation deductions under Division 40 of the Income Tax Assessment Act 1997;
- the Business Tax Break is given to the taxpayer entitled to claim depreciation, including equipment lessors;
- the incentive is available for both the cost of acquiring and constructing additional assets and for the cost of making non-deductible improvements to existing assets;
- for small businesses (ie annual turnover of less than $2m) the amount spent on acquiring or improving the asset must be $1,000 or more to qualify. For other business taxpayers the threshold is $10,000; and
- the relevant asset must have been acquired under a contract entered into, or the construction or improvements must commence, on or after 13 December 2008.
|
Small Businesses (annual turnover $2m or less) |
|||
|
Value of Asset |
Date of Acquisition |
Installed before |
Investment Allowance |
|
> $1,000 |
13 Dec 2008 to 30 June 2009 |
30 Jun 2010 |
30% |
|
> $1,000 |
1 Jul 2009 to 31 Dec 2009 |
31 Dec 2010 |
10% |
|
All Other Businesses |
|||
|
Value of Asset |
Date of Acquisition |
Installed before |
Investment Allowance |
|
> $10,000 |
13 Dec 2008 to 30 Jun 2009 |
30 Jun 2010 |
30% |
|
> $10,000 |
1 Jul 2009 to 31 Dec 2009 |
31 Dec 2010 |
10% |
Example
On 31 March 2009 an engineering company enters into a contract to purchase a item of plant at a total cost of $50,000 and with an effective life of 20 years. The item of plant is installed ready for use on 10 August 2009.
When the company lodges its 2009 - 10 income tax return, the company will be able to claim a deduction of $17,500 in respect of the oven: ie the first depreciation deduction of $2,500 ($50,000/20) using the straight line method; and the investment allowance of $15,000 ($50,000 x 0.3).
Further Information
For a practical paper providing further information on leasing, new versus used assets, which assets are eligible and private use of assets, please click here.
For a copy of the Small Business and General Business Tax Break - Frequently Asked Questions, please click here. To view the draft legislation of Explanatory Memorandum, please click here.
To keep informed of the latest developments and ensure you take advantage of increased tax deductions, talk to Cutcher & Neale prior to making your next asset purchase.
| Time to plan for 2009 | ||
 |
It’s at this time of the year, with the financial year end drawing to a close, that businesses start thinking about replacing or enhancing their payroll systems. It is a long held myth that the best time to do a payroll change over is the start of a new financial year. This could not be further from the truth. |
In fact the end of any month is the perfect time for implementing a new payroll system, and once in, you can start taking advantage of features such as e-mail payslips, e-mail payment summaries and faster pay run processes.
If your considering changing your payroll system, call our Business Software & System Solutions Division today.
We are offering our Blueprint readers a free no obligation 1 hour demonstration of their HR3Pay payroll system. For more information click here.
| Are you undertaking Research & Development activities? Don't miss out on increased tax deductions | ||
|
What are eligible Research & Development (R&D) activities? Typically eligible R&D activities would involve the following:
|
 |
Overview of the R&D Tax Concession
The R&D Tax Concession is the principal Commonwealth Government initiative to increase the amount of R&D undertaken in Australia.
The concession is available to all Australian companies and offers the following:
- a tax deduction of up to 125 per cent of expenditure incurred on R&D activities
- an R&D Incremental (175% Premium) Tax Concession for those companies increasing their R&D expenditure and who have a three-year history of registering and claiming the 125% Tax Concession, or of receiving grants for R&D projects under Innovation Australia's R&D Start and Commercial Ready programs
- an R&D Tax Offset for companies whith group turnover under $5 million and a grouped expenditure of up to $1 million for the year
- an R&D Incremental (175% International Premium) Tax Concession for those companies belonging to a multinational enterprise group for additional R&D expenditure on behalf of a grouped foreign company above a rolling three-year average of expenditure.
Registration requirements
Annual registration of R&D activities with Innovation Australia is a prerequisite for companies claiming the tax concession. Applications must be lodged annually within 10 months of the end of the company's year of income.
For companies with a 30 June year end reporting date, you have until 30 April 2009 to submit your registration.
It is only after registering with Innovation Australia that companies can claim the R&D concession in their company tax returns.
We note that the above information is a summary only of the eligibility and guidelines in relation to R&D registrations. Should you require further information or assistance please contact David Carpenter or Jace Pedonese from Cutcher & Neale to discuss your requirements.
| Meet David Carpenter |
David Carpenter is a Partner with Cutcher & Neale and is part of our Business Services division. David's qualifications include Bachelor of Commerce from The University of Newcastle, a Fellow of the Institute of Chartered Accountants in Australia (ICAA), a Fellow of the Taxation Institute of Australia and Member of the Australian Institute of Management. He also has extensive experience assisting SME’s in the industrial sector in dealing with their accounting, taxation and business advisory needs.
David is a keen sportsman enjoying all forms of sport. He is a keen golfer. David is married with two children.
David’s expertise is in the following areas:
- Taxation Advice and Planning
- Business Structure Consultancy
- Business Planning, Reconstruction and Valuation
- Management Consultancy
- Franchise Consultancy
- Goods & Services Tax
|