• What does the new R&D tax credit offer you?
• Juggling tax losses
• ATO & the "Cash Economy"
• Increases to the SMSF levy
• What is Ordinary time earnings?
• Tax Tip - Home office expenses
• Going forward with Banklink
• Recommendations
• Important Dates
• About DSR

Welcome Note

Welcome to What's Happening at DSR in September.

All of us at Davis Stewart Rowland are looking forward to helping you achieve your business and personal goals and work towards building a successful retirement plan.

We aim to bring you interesting and tax effective ideas for saving you money, explore new developments in taxation and the way we do business, and keep you up to date with issues that may affect you and your business.

Remember...

'whatever your financial and accounting needs we can work with you to find a solution".

Australia has progressively fallen behind in the Global Innovation Index for the last few years. Last year alone, Australia slipped three places from 18 to 21 (Switzerland, Sweden and Singapore were the top performing countries).

Boosting innovation is a question that has plagued the Government for some time and the restructuring of the research and development incentives is an attempt to better target and encourage true innovation. For many years the criticism has been that R&D funding is too narrowly applied to make a difference and generally relates to product development rather than innovation – so, activities that a business would generally undertake rather than innovation. In addition, small business has been vastly under represented because in many cases the owners are simply unaware that what they are doing could qualify for the incentives available or because it appears complex and the amount of paperwork required to apply and sustain the funding may not be worth it. The irony is that in many cases SMEs are funding their own development whereas larger companies, that have a larger capacity to manage the cost of the risk of innovation, are capitalising on the concessions available.

The new R&D tax incentive tightens the definitions for R&D funding in an attempt to give the Government a bigger bang for its innovation buck, and provides additional incentives for businesses under $20 million.

For small companies with an aggregated turnover of less than $20 million, the R&D tax incentive provides a 45% tax offset for eligible R&D activities. Read on...

Juggling tax losses

We are often asked whether it’s possible to offset a loss in one company against the profit in another.

The answer is that there is no automatic way of offsetting losses and profits between your companies.

Most people try to manage a situation like this by putting through charges between the companies after year end (for example, a charge from the profit making company to the loss making company for ‘management fees’). This is not an effective strategy and creates a risk position for you. Read on...

We are all aware of the ATO’s attitude towards participants of the ‘cash economy’ and so they go to great lengths to make it harder for people operating in the cash economy to get away with it. Cash economies are illegal as it is tax evasion and the ATO is dedicated to eliminating this practice. Using a broad range of indicators, the ATO can identify if a tax payer is suspected of avoiding their tax obligations and therefore a candidate for audit or review.

One indicator includes data matching external sources of income from parties such as:

• other government agencies
• financial institutions
• trade suppliers
• comparing a business against Small business benchmarks for their industry
• businesses that report net income that appears to be lower than required to support the business operators personal living expenses
• monitoring the behaviour of previously audited taxpayers to encourage their continued compliance
• allegations of tax evasion sourced from the community.

For example, the ATO obtained data in relation to all sales of plasterboard and cornice from the three largest plasterboard suppliers in Australia, Boral Limited, CSR Limited and Lafarge Plasterboard Pty Ltd. This data was checked against the ATO's taxpayer’s data for any inconsistencies in reported income and expenses. From this type of analysis the ATO can determine if a business’s purchases are not equating to similar income being generated.

The ATO has published more than 100 small business benchmarks from several industries. These benchmarks allow one business to compare their performance with another similar business in their industry. These benchmarks cover all business structures and include low, medium and high turnover ranges. The ATO also uses these benchmarks to see if businesses are avoiding their tax obligations.

If you would like to know more about the small business benchmarks for your industry talk to your accountant today.

Increase to the Super Fund Levy

Effective 1 July 2011 the annual self managed super fund supervisory levy will increase from $150 to $180. This is payable by the self managed super fund when it lodges the 2011 tax return.

 BankLink - Make the Change

The Banklink System is an excellent alternative to bookkeeping and MYOB.

It allows us to complete your accounts efficiently and accurately, whilst saving you precious time and money.

Your financial institution can simply provide our office with your bank statement data electronically and securely encrypted. From here we can process all your transactions with minimal input from you.

IT REALLY IS THAT SIMPLE.

So do yourself a favour and talk to us today about using Banklink for your business.

Recommendations    
        
As you well know, the lifeline of any business comes from the recommendations from existing clients.

We know that you have been pleased with our service levels so far, and believe that you may know of other businesses like yours that we could help in the same way. Do you know of anyone who would require our services? We are happy to sit down and discuss their accounting.

And to show our appreciation, each time one of your new business referrals becomes a client, we will send you a bottle of Cloudy Bay Sauvignon Blanc 2009 as a thank you.

Important Dates

21 September - Monthly Instalment Activity Statement 1-31 July 2011

About Davis Stewart Rowland

Davis Stewart Rowland is a three partner firm located at The Entrance on the NSW Central Coast. With over 50 years experience we have an in-depth knowledge of what the business owner and investor needs to embark and stay on the path of growth and wealth creation.

We have a unique appreciation of the issues business owners and investors face, which makes us an integral part of our client's advisory team. Our comprehensive approach includes:

• Benchmarks
• Tax minimisation plans
• Cash flow forecasting
• Business information processing
• Management & strategic advice

Whatever your needs we can help find a solution.

Contact us today