TOP TIPS FOR MAXIMISING YOUR TAX BENEFITS

 by Marc Peskett, May 2010

Financial Books and Records
 

First and foremost, and this may sound obvious, make sure your financial books are in order. As an accountant I've seen it far too many times when clients scramble around up to the deadline to find receipts, contracts and all manner of paperwork to legitimise their claims. Ensuring your paperwork is in order now will also mean you're in a much better position to assess your tax exposure and implement planning strategies.

Research and Development Tax Credit
 

Another area that requires forward planning for maximum benefit is the new R&D Tax Credit that replaces the R&D Tax Concession in 2010/2011.

The two core components of the package are a 45% refundable tax credit (the equivalent to a 150% concession) for companies with an aggregated turnover of less than $20 million per annum, and a 40% standard tax credit (the equivalent of a 133% deduction).

If you're an exporter, you should investigate if you're able to receive the Export Market Development Grant (EMDG), as you may be entitled to a grant of up to 50% of eligible export promotion expenditure over the $10,000 threshold.

The main eligibility criteria requires an annual income of no more than $50 million during the grant year and expenditure of at least $10,000 on eligible export promotion activities during the grant year.

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.
 

Trust Distributions

If you are operating a business from a trust, it's time to think about income distributions which must be determined by June 30. While the appropriate definition of 'income' to include in trust deeds has long been debated, a recent decision by the High Court in Bamford's Case, has provided some clarification on the matter.

The High Court rejected the arguments used by the ATO and decided that the terms of the trust deed should prevail in determining how the beneficiaries should be assessed to tax.

The decision also provides that the correct method of determining a beneficiary's 'share' of trust income is the proportionate approach.

Loans or Payments to Shareholders

Finally business owners should also be aware of Division 7A of the Income Tax Assessment Act. Under this division, loans or payments made to shareholders or their associates could be taxed in the hands of shareholders as unfranked dividends.

To avoid taxation, any new loans should be made under a complying loan agreement or fully repaid by the date of lodgement of the company's 2010 tax return.

For existing complying loans minimum repayments need to be made and interest charged at the ATO benchmark rate. The term of loan cannot exceed seven years, unless secured by a mortgage over real property.

This division also applies to payments made to shareholders or associates. From July 1, 2009 there is a requirement for shareholders and their associates to pay market value "rental" for private use of company assets, eg. holiday homes, boats, etc.

  Why Economists Failed to Predict the Financial Crisis  Published : May 13, 2009 in Knowledge@Wharton

  SOURCE:  http://smallbusiness.theage.com.au/managing/management/happy-new-year!-how-to-kick-goals-in-2009-910699026.html#

Happy New Year! How to kick goals in 2009

Larissa Ham | December 17, 2008

SOME will lose their nerve, others will hang on by the skin of their teeth - but for many small businesses 2009 will actually be a happy new year, say optimistic business leaders.

After a hair-raising 2008, retailers, who plan and order stock about six months in advance, have virtually ridden out the economic woes, says Australian Retailers Association executive director Richard Evans.

Mr Evans said while surveys had shown many believed Australia was in the grip of a recession, actual data showed otherwise, with sales figures already on the increase.

"Now what we're saying is we'll probably start seeing some recovery about May with some growth in September,'' he said.

"Our optimism is pretty high.''

But Mr Evans says retailers shouldn't be breaking out the champagne just yet - instead they should be making solid resolutions for the new year.

"In terms of retail, what they should be looking at is their entire expenditure lines, line-by-line,'' he said.

Retailers should also carefully analyse supply channels, contracts and review transport arrangements, he said.

Small and medium businesses should also be reviewing their business plan every three months to stay on track and focus on increasing loyalty programs and local area marketing.

In franchising circles, operators should look forward and avoid starting 2009 in a negative or fearful fashion, says Franchise Council of Australia executive director Steve Wright.

"It's no good for businesses to behave that way either for themselves or the national economy,'' Mr Wright said.

"That doesn't mean that they should be reckless. They should be prudent, but they should be proactive, not pessimistic, they should be diligent, not defensive.''

"Franchising in past economic downturns has fared relatively better than the rest of the small business community and that's because it has a strong band that people know and trust, and within franchise networks there is the power of a collective.''

Mr Wright said SMEs should look at prudent ways to stay on the front foot, watch their cash flow and map out a game plan for the next 12 months.

"Know what you're going to do if things either get better or worse,'' he said.

"That way you're not reacting in an instinctive way, you're reacting in a thoughtful way ahead of events, rather than events happening to you.''

Collection agency Dun & Bradstreet has provided the following tips for keeping your cash flow in good order in 2009:

* Develop a cash flow projection and ensure you monitor and update it regularly

* Minimise bad debts through an established credit assessment procedure

* Establish an accounts payable policy at the outset of every credit relationship

* Establish a deposit policy for work in progress

* Monitor your customers' use of credit and adjust their credit limits accordingly

* Closely manage your invoice process and collections practices

* Rearrange annual payments such as insurance so you pay small instalments frequently. This will help to smooth out lumps in your cash flow cycle.