Media Release
SME's need to plan now to reap benefits for next financial year
29 May 2009
There are a number of areas in which SME's need to plan now to maximise their benefits in the coming financial year according to respected accounting and advisory firm MPR Group.
Marc Peskett, partner of the Melbourne based firm, says the most common areas to consider are the investment tax break, the R&D tax concession and superannuation, however it's all in the planning if businesses want to maximise returns.
"What many SME's don't realise is that within each area of benefit there are a number of issues to consider if they really want to obtain maximum returns," Mr Peskett says.
"For example within the investment tax break businesses can aggregate their investment in batches of assets that are identical, or substantially identical, and in sets of assets for the purposes of meeting the relevant new investment threshold.
"Businesses should consider grouping similar investments to get over the $1,000 value threshold for small businesses and $10,000 threshold for large business such as grouping the purchase of four $300 printers providing a combined investment value of $1200."
Mr Peskett says SME's should also consider how the asset is financed. If the asset is acquired under a finance lease arrangement it will generally be the lessor that will be entitled to the tax break and not the business lessee.
"The lessor may pass on the tax break through reduced lease payments, but this will be subject to commercial negotiation and should be thoroughly investigated to see if there are savings to be achieved," Mr Peskett says.
"If the lease payments are reduced, the cash flow benefit of the investment tax break for the business lessee will be spread over the term of the lease, which may not suit the lessee if they are in a taxable position.
"Conversely if the business lessee is in a tax loss position, then leasing where the benefits of the tax break are passed on through reduced payments maybe a better cash flow option."
A review of the timing for purchase of an asset is also important to consider, Mr Peskett says, as for larger businesses the 30 percent tax break only applies to an investment commitment entered into after 12 December 2008 and on or before 30 June 2009, with the assets installed ready for use on or before 30 June 2010. Assets acquired after 30 June 2009 and on or before 31 December 2010 will only be eligible for the 10 percent break.
Mr Peskett says another area that requires planning for maximum benefit is the R&D Tax Concession, the Australian Government's main incentive to increase industry's research and development, with its cash rebate a critical source of cash for many small innovative companies.
"To be eligible to claim the tax concession, companies must put an R&D plan in place before 30 June detailing their projects for next year and how they will be funded," Mr Peskett says.
"This is particularly critical for businesses who are coming into their fourth year of continuous R&D claims and may be eligible for the 175 percent deduction as it's proposed that this deduction be abolished after the 2009/10 financial year.
"Companies should also consider their R&D investment and planning to take advantage of the increase in the expenditure cap during 2009/10 from $1 million to $2 million.
"The increase is a transitional measure to extend the R&D tax concession cash rebate to a greater number of innovative companies before the proposed R&D tax credit comes into effect in 2010/11 and could significantly increase the cash rebate particularly for those companies eligible for the 175 percent premium deduction."
Mr Peskett says for exporters, investigation of their eligibility to receive the Export Market Development Grant (EMDG), administered by Austrade, should be conducted now as they may be entitled to a grant of up to 50 percent of eligible export promotion expenditure over the $10,000 threshold.
The EMDG is also an important source of cash for small growing businesses to help fund international marketing activities.
"You're eligible to apply for an EMDG if you've had annual income of not more than $50 million during the grant year and spent at least $10,000 on eligible export promotion activities during the grant year," Mr Peskett says.
"If you're a first time applicant, you may combine two consecutive financial years' expenses in the first EMDG claim to meet the $10,000 threshold.
"Companies with international subsidiaries involved in export market development activity may also be eligible, however the Australian entity would have to pay for these expenses directly and show them as expenses in their financial statements, or the international subsidiary would have to invoice the Australian entity for the expenses.
"Regardless, if you are eligible you should start preparing now to lodge export market development grants before the 30 November lodgement date by collating expenditure records, trip reports and other relevant information."
Mr Peskett says business owners should also take the time to think about their own wealth position as well as that of potential concessions for their company and consider topping up their super contributions before the concessional contribution cap is halved from the start of the 2009/10 year.
Marc Peskett can be contacted for comment on 03 9869 5900.
