How the budget can grow your small business

Oct 09, 2020

Leica Ison, founder and chief executive of technology company Skyjed, says federal budget small business policies will support her plans to double staff and expand into the UK and Europe.

Ison, who started the company three years ago, says: “We are a good example of a technology business that has developed solutions and is growing to the next stage. We need to commercialise our intellectual property by scaling up and growing globally.”

A key incentive will be the research and development incentives that allow companies with total annual turnover of less than $20 million a tax offset at 18.5 percentage points above the full company tax rate of 30 per cent.

The budget also proposes to scrap the $4 million cap on annual refunds.

“This helps boost cash flow,” says Rebecca Schot-Guppy, chief executive of FinTech Australia, a professional body for companies automating financial services. Schot-Guppy wants the R&D incentives backdated to July 1, 2020.

JobMaker, a job incentive scheme, will help Skyjed, a Tibetan word meaning growth, to take on another 20 employees in Melbourne and Sydney, adds Ison.

Skyjed is able to claim $200 a week for each additional employee it hires aged 16 to 29 and $100 a week for those aged 30 to 35.

Skyjed, which has plans to launch in the UK and Europe next year, offers a digital system for auditing products already in the market – ranging from advanced manufacturing to financial services and energy – to determine whether they are meeting governance standards.

New concessions that allow immediate write-offs for the full cost of eligible assets first used or installed between October 6 and June 2022 will also help boost cash flow, says Ison, who previously worked in research and development for Telstra and the National Broadband Network.

'Don’t rush out to buy a Porsche'

She can immediately deduct the full cost of items such as plant and machinery, fixtures and fittings, technology such as laptops and computers, and motor vehicles, such as vans and cars less than $59,136.

“Expensive cars are likely to be excluded, so don’t rush out to buy a Porsche or Ferrari through your business,” says Mark Chapman, director of tax communications for H&R Block.

“With many businesses cash-strapped and unable or unwilling to borrow, initial take-up may be limited, at least until some semblance of business confidence is restored,” he says.

Land and buildings are not included in the immediate expensing provisions and will continue to be written off at 2.5 per cent.

Adrian Raftery, tax author and principal at Mr Taxman, a tax and accountancy practice, adds the instant asset write-off provides only a “fraction back in tax”.

“For example, a $100,000 outlay for new machinery will save a company $26,000. That means the company’s vital cash flow is worse off by $74,000,” Raftery says.

The write-off is only expediting the tax claim in one year, rather than several.

“So there is no extra tax benefit over the lifetime of the asset – only the time value of money in saving tax in year one,” he says. “And with interest rates pretty low on savings, you really are not going to get much benefit with that either.”

Original article published here by The Australian Financial Review on 9 October 2020.

 

comments-rhsLatest Comments

  • "My partner and I are wanting to get married. Unfortunately he has alit of tax debt from when he was a teenager. How or will this affect our tax returns once married? "

    By: BM at Jun 05, 2021 2:14AM

    Post: Marriage

  • "Old thread, but have a related question... If I have a "Foreign LLC" registered in the US and am trading Futures on US exchanges using a US FCM/broker (but am an Australian resident for tax..."

    By: CJ at Apr 06, 2021 6:46AM

    Post: Trading US futures in Australia

  • "Hi. I bought shares back in 2018.. And a few more since. I borrowed the money out of my home loan to do this. I still own the shares, but do not receive any dividends from them, although the value..."

    By: Harry at Mar 31, 2021 3:38AM

    Post: Borrowing to buy shares

  • "Hi Mr Taxman, this is a great forum, thanks. I am trading forex and commodities on an Asian platform. Whn I went to withdraw funds I was informed that the Australian Tax department requires me to pay..."

    By: Peter Andrew Sutherland at Mar 26, 2021 10:41PM

    Post: Foreign currency trading

  • "Im planning on hiring a Nanny to drive my child to my ex husband and back twice a fortnight adding up to approximately 6,000km a year. What will they be eligible to claim and what kinds of records..."

    By: Peta Granger at Feb 25, 2021 3:52AM

    Post: Claiming car expenses