Welcome to the second edition of the online newsletter for 2008. We hope that you find the articles in this addition informative and helpful as you strive to increase you business’ potential. We continue to value any feedback or opinions that you may have as they allow us to improve the quality of our services to you, our valuable clients.
Included in this edition is information about how the Rudd government’s first budget will affect small businesses and some information relating to the end of the financial year, which is fast approaching! If you require any more information on these articles or on anything else, please don’t hesitate to contact our office.
Sheriff Iskander and the team at Alexanders.
Preparing yourself for the End of the Financial Year
Many of our business clients like to review their tax position at the end of the financial year and evaluate any year-end strategies that may be available to legitimately reduce their tax. Traditionally, year end tax planning for small businesses is based around two simple concepts ie., accelerating business deductions and deferring income.
However, the ground rules were changed with the introduction of the Simplified Tax System (“STS”). Since the 2002 income year, businesses that elect to enter the STS will no longer determine their taxable income in the same way as they have done in the past.
In some instances, STS taxpayers will have greater access to year end tax planning due to particular concessions that only apply to them. In other instances, non-STS taxpayers may be better-off. The following are a number of areas that may be considered.
Although company tax rates will stay the same for the 2008 income year, (the current rate is 30%) there are still timing benefits to be had by accelerating any income tax deductions to the current income year.
Deductions generally fall into one of three categories:
Prepayments
STS Taxpayers |
Non-STS Taxpayers |
Prepayments will generally be fully deductible in the year they are paid where they cover a period of no more than 12 months. |
Any part of the prepayment relating to the period up to 30 June is deductible in full. Generally, only 20% of that part of the repayment relating to the period after 30 June will be deductible. |
Checklist |
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In addition, both STS and non-STS taxpayers may claim the following prepayments in full:
Kinds of expenses that may be prepaid:
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Accelerated Claims
This is where a business taxpayer brings forward the expenditure on regular, on-going deductible items. It could also apply to the purchase of plant costing less than $1,000 (for STS taxpayers only).
STS Taxpayers |
Non-STS Taxpayers |
STS taxpayers will be entitled to deductions on a “cash basis” only. Therefore, if they accelerate or bring forward expenditure they must ensure that they have paid the amount by 30 June 2008. This covers the following expenditures:
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Non-STS taxpayers will be entitled to deductions on an incurred basis. Therefore, there is no requirement for the expense to be paid by 30 June 2008. As long as |
Checklist |
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The following may act as a checklist of possible accelerated expenditure:
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Accruals
STS Taxpayers |
Non-STS Taxpayers |
STS taxpayers will generally only be entitled to deductions for expenses they have paid, which means they cannot accrue expenses as at 30 June 2008. The accrual items in the checklist below will not, therefore, be deductible to STS taxpayers. |
Non-STS taxpayers are still entitled to a deduction for expenses incurred as at 30 June 2008, even if they have not yet been paid. |
Checklist |
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The following expenses may be accrued:
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If you require more information about the end of 2008 financial year, please do not hesitate to contact our office on (02) 9438 3233 or send us an email.
Budget News for Small & Medium Enterprises in 2008-09
With the introduction of the Rudd Government’s first budget in May, there have been many initiatives introduced that are relevant to small and medium businesses and their owners. The first of these initiatives, Clean Business Australia, will grant a total of $240 million to assist businesses and industries with energy and water efficient projects. The second of these schemes will provide $42 million over four years to establish Business Enterprise Centres that will assist and guide small businesses. In combination, both initiatives will allow small and medium enterprises to grow and move forward into the twenty-first Century.
The first Rudd Government project, Clean Business Australia, will comprise three smaller initiatives designed to combat climate change and improve the environmental efficiency of SMEs:
- Climate Ready- will provide grants from $50,000 to $5 million to support research and development on a matching fund basis. These grants will be delivered to initiatives focused on solutions to climate change challenges.
- Re-tooling for Climate Change- will deliver $25 million over 4 years to Australian manufacturers in order to improve production processes and reduce energy use and carbon emissions. SMEs will be able to apply for grants between of $10 000 and $500 000 to invest in projects such as water recycling and energy efficient manufacturing tools.
- Green Building Fund- is designed to assist Australian businesses in implementing cost-saving and energy efficient measures through the improvement and refitting of already existing buildings. This Fund will grant $90 million over four years.
The second initiative promises to inject $42 million into thirty-six low cost business advisory centres designed to assist SMEs. The goals of this project are to maximize the growth potential, prosperity and sustainability of small business in Australia through the improvement of business skills of operators and independent contractors.
As climate change becomes increasingly more evident, the Australian Government will be introducing initiatives to allow SMEs to make affordable changes to operations and infrastructure. These grants, along with the proposed Business Enterprise Centres, should increase the efficiency and productivity of SMEs in Australia, thereby propelling them into the twenty-first Century.To obtain further information about how new budget impacts your business, contact our office on (02) 9438 3233 or send us an email.
I can't give you a sure-fire formula for success, but I can give you a formula for failure: try to please everybody all the time.
-- Herbert Bayard Swope (1882 - 1958)
Disclaimer: The information contained in this newsletter is not advice but is information of a general nature only. This is not a comprehensive coverage of any of the matters raised and we therefore recommend that before acting on any of the matters raised in this general newsletter, that you should discus the matter with us. This newsletter is provided to clients of Alexanders Accountants as a helpful guide and for their private usage only. We accept no responsibility to any other person acting on any of the information in this newsletter. We will not be responsible for any action taken by our clients who choose to act without seeking our prior consultation.