GETTING ORGANISED now for tax time will give small business owners peace of mind and confidence later, recommends Intuit Inc. Asia Pacific vice president and managing director Brad Paterson.

Through advice gathered by Intuit, the maker of QuickBooks Online, Mr Paterson has released eight tips to help business owners cope with the lead up to the June 30 financial year deadline – and create some deduction opportunities.

“Most small to medium-sized organisations have the discipline of quarterly business activity statement compliance,” Mr Paterson said.

“But many businesses still face the significant task of annual reporting. Whatever the reporting regime, the end of the financial year signals a vast array of deduction opportunities as well as potential threats to cash flow.”

Mr Paterson said a great start was to make an early appointment with an accountant.

Christian Schoener, director of accounting, tax and business consulting at the Sydney-based CGSA Group, said getting in early gives you time to review business results before the rush of June 30.

“If you’re using cloud accounting software, your transactions will always be up to date,” Mr Schoener said. “Then you and your accountant can estimate your likely tax position and come up with strategies that make sense for your business, and give you time to implement them.

“The Federal Budget announcement on May 13 could also affect small and medium businesses, so keep an eye out for this and talk to your accountant to help optimise your tax position.”

Mr Paterson said through its market experience, Intuit has developed eight top tips to help remove the stress of the upcoming deadline – but suggested businesses should always consult with a qualified accountant or the Australian Taxation Office for specific questions.

1. Be certain to get super deductions.

Even though superannuation does not have to be paid until July 28, paying employee and personal contributions by June 30 will allow time for processing delays and getting valuable deductions this year.

According to the ATO, superannuation is only deductible when paid. That means that it must be cleared through your bank account, received and recorded by the employee’s superannuation fund prior to that date. Be prepared and pay early.

2. Pay expenses in advance.

If your cash flow allows it, consider paying recurring expenses in advance. Things like insurances, interest, rent, conference fees, subscriptions, travel costs can mean an immediate deduction.

Note that the expense may not be eligible if it covers more than 12 months.

3. Claim deductions now for future expenses.

You may be entitled to claim an immediate deduction for expenses you are committed to, goods or services that have been received or work performed – even if won’t happen before year end. This includes salaries and wages, staff bonuses and directors’ fees.

4. Spend up – but only if you need to.

If you need to replace low-cost equipment or purchase new tools, computers or other equipment soon, consider purchasing them before June 30 to get the full tax benefit now.  

Note that you may only receive a $300 benefit for every $1,000 spent. (The company tax rate is 30 percent). Always check the ATO website for the latest updates.

5. Write off bad debts.

To deduct bad debts, the ATO requires you to write it off while it still exists, prior to June 30.  Review your accounts receivable with your accountant or bookkeeper to determine whether a deduction qualifies before the deadline. 

6. Check your assets and inventory.

Consider writing down or writing off obsolete stock. Then think about revaluing the remaining stock using one of three methods: cost price, market selling value or replacement value. Choose the method that produces the lowest stock value; if the value of closing stock is less than the value of your opening stock, you may receive a deduction. When the reverse occurs, you may generate income.  

7. Repay any borrowings.

If you, a family member or an associate have borrowed money from your business, you should ensure that the company charges the appropriate interest and consider making the minimum required repayments before the end of the financial year.

Failure to do so may result in the entire amount of the loan being treated as taxable income, causing you to be taxed personally at rates of up to 46.5 percent.

8. Pay on time; don’t overclaim.

Unpaid taxes and fraudulent claims are serious business. The ATO is actively looking to recover $17.7 billion, with 60 percent of that – some $10.6 billion – owed by small businesses. It’s critical to submit accurate returns and pay on time.

Remember that fines are calculated at a higher rate than a loan and interest on accumulating tax debt is not deductible.

THINK AHEAD TO NEXT YEAR

CGSA’s Mr Shoener said it was not too early to begin thinking about next year.

“If you expect your tax pay will be higher this year than next year, you may benefit from deferring income to next year and accelerating deductions into this year,” he said.

“Using credit cards to pay for tax-deductible expenditures will earn you the deduction this year, even if you don't pay for it until next year.”

Intuit’s Mr Paterson said the growing popularity of cloud-based services simplifies paying taxes for small business owners and accountants alike.

“Entrepreneurs and business owners have enough on their plate without the overhead of having to sort through incomprehensible tax and financial matters,” he said.

“Fortunately, year-end compliance is now much easier with the advent of cloud-based accounting software that’s been designed specifically for small and medium businesses.

“Throughout the year, transactions are seamlessly exported from bank and PayPal accounts, payroll is automatically calculated and integrated, all invoicing elements are captured, and debtors and creditors are a breeze to track.

“All of this means you know where you stand financially – not just at year end but at any time – saving you time when it comes to doing your taxes and giving you the ability spend more time on building your business.”

www.intuit.com

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MANY businesses undertaking research and development (R&D) are missing out on helpful 45 percent refundable tax offsets through simple errors in record keeping. 

According to MSI Taylor Accountants’ Matt White, recent ‘definitions’ changes to the Australian R&D Tax Incentive were ambiguous and left many small businesses failing to make R&D claims and, in other cases, not receiving their eligible cash refunds, even though they were regularly undertaking eligible activities and already had existing documentation practices that satisfy the requirements.

Mr White said the Australian R&D Tax incentive was “an easy to access entitlement program that helps businesses offset some of the costs of doing R&D”.

According to AusIndustry, the two core components of the R&D Tax Incentive, which replaced the former R&D Tax Concession, are: a 45 percent refundable tax offset, equivalent to a 150 percent deduction, to eligible entities with an aggregated turnover of less than $20 million a year; and a non-refundable 40 percent tax offset, equivalent to 133 percent deduction, to all other eligible entities.

“In essence, the program aims to help more Australian-based businesses do R&D and innovate,” Mr White said.

He said the 45 percent Refundable Tax Offset, which in many cases can be ‘cashed out’, should be a crucial consideration for small business cash flow planning.

“Yet many small companies are still missing out on their opportunity to make claims and receive cash refunds due to the perceived complexity and ambiguity surrounding eligibility and the application process,” Mr White said.

The new R&D laws became effective from July 1, 2011, and introduced a greater emphasis on record keeping. They also provided a new definition for eligible activities – as either Core R&D Activities or Supporting R&D Activities.

Mr White said under the definitions, Supporting Activities needed to be either ‘directly related’ or for the ‘dominant purpose’ of supporting the Core R&D Activities.

These new definitions were ambiguous, he said.

“Key concerns were around: How to identify if the activities they were undertaking where eligible? How burdensome is the application process? What are the documentation and ongoing record keeping requirements?” Mr White said.

“As a result and due to industry, adviser and participant feedback, AusIndustry – the government department responsible for administering the Australian R&D Tax Incentive program, together with the ATO – have released various industry sector guides to help applicants identify eligible activities and understand their compliance requirements,” Mr White said.

“Released throughout 2012 and 2013, AusIndustry have prepared guidance and case studies for the ICT, agrifood, biotechnology, manufacturing, energy, and built environment sectors,” Mr White said.

“AusIndustry have also introduced a series of focus and face-to-face workshops throughout each state and in 2014, will be trialling various e-learning modules in order to reduce the perceived ambiguity and confusion around the R&D program.”

Mr White warned that to now make an R&D Tax Claim – and to potentially receive a cash refund of monies spent – companies must register their R&D activities each income year in which the activities are undertaken.

“Importantly, companies that wish to make R&D Tax claims for eligible expenses incurred during the period ending 30 June 2013 must submit an R&D Application with AusIndustry by 30 April 2014,” he said.

Mr White said MSI Taylor is part of the MSI Global Alliance whose member firms have assisted 100s of small businesses through to ASX-listed companies across a broad range of industries in identifying and preparing R&D claims “as well as helping them understand their compliance requirements”.

http://www.ausindustry.gov.au/

http://www.msitaylor.com.au/

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MERGERS and acquisitions (M&A) trended up in Australia in 2013, both in value and activity, capped off by the final big deal of the year: Scentre Group’s merger with Westfield Retail Trust for $11.9 billion in December.

Mergermarket's reports on M&A uptrends in Australian markets are seen as positive economic signs.

Australia’s M&A activity in 2013 added up to$ 73.1 billion worth of deals in a 66.5 percent increase on 2012’s $43.9b, according to the latest report by global M&A reporting group Mergermarket, a division of the Financial Times. Mergermarket tracked an extra 22 deals, with 445 reported Australian deals in 2013 over 423 in 2012.

Significant in the mix is the growth of private equity buyouts, which have steadily grown over the past four years.

This activity peaked in 2013, according to Mergermarket research, with a 16.9 percent share of the country’s total M&A compared with 12.5 percent in 2012.

Private equity buyouts valued at $12.4b reached the highest value since 2007’s $22.6b and more the doubled the value in 2012 ($5.5bn) with a 125.5 percent increase.

Last year included two of the highest valued quarters in private equity activity since 2007. After the rise in Q2 to $5.5b in deals, a dip followed with buyouts worth $0.5b in Q3 but Q4 increased over four times the previous quarter to $4.8b.

After an absence of any transport sector buyouts in 2012 two deals targeting transport groups during 2013 amounted to $6.1b, accounting for a dominant 49.1 percent of buyout activity. A consortium led by NSW Ports won the auction of Port Botany for $4.3b which became the top buyout deal of 2013.

The other big one in the sector was the acquisition of 26.7 percent of the Port of Brisbane by Caisse de Depot at Placement du Quebec from Global Infrastructure Partners, which was valued at about $1 billion.

Another significant one was NSW Ports Consortium again, who wrested Port Kembla Pty Ltd from the NSW Government for about $760b.

Canadian investment was prominent again in the 85.08 percent stake in the Commonwealth Property Office Fund by Canada Pension Plan Investment Board and Dexus Property Group for $3.37b.

Another high profile private equity buyout in 2013 was TPG Capital LP’s takeover of poultry farmer and manufacturer Ingham Enterprise Ltd for around $1b.

Energy, mining and utilities continued to dominate the Australian M&A market overall in 2013.

Despite a drop in market share from 44.2 to 28.8 percent, the sector’s value increased 8.5 percent from $19.4b in 2012 to $21b in 2013. The financial services sector experienced a higher level of activity by both deal value and the number of deals in 2013 with 34 deals accumulating $10b, more than 10 times the $0.7b in 2012 with eight more deal announcements.

It was a spectacular end to the year, headlined by that $11.9b merger by Scentre Group with Westfield Retail Trust in December. The 22 announced deals in Q4 (matching the 22 deals in Q4 2012) amounted to $34.8b which represented the highest valued quarter targeting an Australian company since Q4 2010 ($43.2b).

Private equity exits followed a similar upward trend with 28 deals valued at $4.3b. The annual total increased 87 percent compared with 2012’s $2.3b but was far from reaching 2011’s $10.5b. Both Q1 and Q4 2013 saw private equity deals worth $1.9b which represented two of the highest quarters since 2011, where every quarter posted deal values above $1.5bn which was only seen in that year and in 2006.

Exits in the industrials and chemicals sector saw $1.3bn-worth of deals rise 232.6 percnt above the $0.3b seen in 2012. The sector had the second highest market share by value at 30.5 percent, up from 13.9 percent in 2012.

There was also been an increase in cross-border activity by value after what Mergermarket described as “a dismal 2012”.

The most notable increase was for inbound deals because there were also 13 more deals in 2013 (195 deals) compared with 2012 (181 deals).

As a result, the $31.6b in transactions increased 24.4 percent from $25.4b in 2012. A static 93 deals in 2013 aggregated $9.8b worth of deals, up 58.1 percent compared with 2012 ($6.2b).

According to Mergermarket, UBS Investment Bank retained its place at the top of the financial advisor league table by value ($30.2b) and also reached first place by deal count after advising on 28 deals, 14 deals more than in 2012 and up 340.5 percent by value.

Herbert Smith Freehills topped the legal advisor league table by value ($36b), representing a 64.1 percent increase compared with 2012.

King & Wood Mallesons rose from second place to the top of legal advisor rankings by deal count with 62 deals amounting $18.7b, five more than in 2012.

http://www.mergermarket.com/

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