Are you claiming property depreciation on tax?

May 24, 2017

property investment and depreciation image

by the CharterNet team

There are several property-related tax deductions that investors claim, including Council and water rates, property management fees and repairs. But there’s one big deduction that most property owners don’t even know about: depreciation. It’s also often the largest claimable tax deduction for rental properties.

However, the Federal Government’s 2017/18 Budget has made changes to depreciation rules that may affect what you can claim. Keep reading to find out how.

What are the depreciation changes in the 2017/18 Budget?

Firstly, if you purchased an investment property before the 2017/18 Budget announcement, you won’t be affected. The changes only apply to residential investment properties purchased after 7:30pm on 9 May, 2017. ‘Purchase’ is generally defined as the date you put down a deposit on your investment property and contracts are signed and exchanged.

The depreciation changes affect fixed or tangible assets, also known as ‘plant and equipment’. A more common name for this is depreciating assets which include stoves, carpets, air conditioning units, curtains and blinds.

If you buy a second-hand investment property, you’ll no longer be eligible to claim depreciating assets. This is because the Federal Government wants to prevent the same items being depreciated over and over by consecutive property investors. If you purchased a new home, you may still claim depreciation – even if you moved out and starting renting the property.

Building depreciation and commercial property is not affected.

While there’s still things to be confirmed by the government, we think it makes sense to take advantage of the current allowances for depreciation before the 2017 financial year ends. There are many companies that offer tax and depreciation schedules – including one that we use called Depreciator – that you should include in your personal and company tax returns. These services are usually 100% tax-deductible, so it’s worth taking the time to find out exactly how much you may claim.

Need more help?

We specialise in accounting services and tax compliance. Please get in touch today to find out more information and learn how the changes apply to you.

6 reasons why your business needs a virtual CFO

May 18, 2017

Strategy image

As workplaces transform – from hot desking to the prevalence of cloud-based technologies – smart companies are fast recognising the benefits of outsourcing their chief financial officer (CFO) function.

And, while the need for virtual CFOs (VCFOs) is increasing, it remains all too common for finance to take a back seat. Yes, you might get someone on board to keep the books in the black, but what about the strategic management of your business’ growth?

VCFOs offer:

1. More flexibility

As we know, many small and medium-sized enterprises don’t require the services of a CFO on a full-time basis. VCFOs give companies access to experienced professionals at the top of their game without the burden of hiring a fulltime employee at the same level. VCFOs work on a fixed-scope basis and offer budgeting, management reporting, high-level strategic advice and corporate advisory services. Having access to a VCFO – as required by your business – greatly enhances flexibility, as you only pay for what you need.

2. Greater productivity

Utilising a VCFO means that senior staff can focus energy on their key responsibilities, rather than areas outside their specialisation. By streamlining and managing relationships with banks, human resources, financial planning, leasing, insurance, legal consultants and other advisers, employee productivity and efficiency is heightened.

3. Diverse experience

VCFOs work across varied industries and business types, from small start-ups to established multi-national organisations. This broad acumen means a VCFO has likely come across a larger pool of issues. A good VCFO has the nous to identify a problem before it becomes one, based on their experience across many sectors. At CharterNet, you’ll be working directly with partners and senior managers with experience from ‘the big four.’

4. Cash flow management

We often hear of clients who say that their business is prospering, but can’t seem to find the money to pay for every day expenses. Cash flow concerns are common for small to medium enterprises as they seek to find a balance between pleasing existing clients, finding new ones… and just paying the bills. There’s often complex problems below the surface that clients aren’t even aware of. Combine that with rapid growth and legislative changes and suddenly cash flow becomes a big problem. VCFOs help identify issues by drilling into the numbers and implementing a cash flow management strategy.

5. Access to accurate and informed software and reporting

Do you dread writing financial reports? You’re not alone. If you’re not a natural number cruncher or doubt the accuracy of your figures, then you’d benefit from a VCFO service. Having a developed understanding of data and its implications is essential in making informed decisions to drive business growth. CharterNet use powerful cloud-based accounting software, Xero, to provide their clients with real-time analysis of a company’s financial position. Xero allows teams to collaborate by making data accessible any time and from any location.

6. Fact-based decision making

A CFO or anyone else who’s an employee of a business is susceptible to internal influences of an organisation and its machinations. Removing the CFO function from staff increases the objective quality of the insights they offer. Only an independent VCFO can provide unbiased analysis of finances, which is a key benefit of outsourcing the function.

Does a VCFO service really work?

In 2015, the CharterNet VCFO team, led by Saeed Mirzakhani, started working with Avonlea Labels – a leading Sydney manufacturer of high-quality adhesive labels. At the time, the business owners at the label company knew their company was prospering, but couldn’t understand why they couldn’t find the budget to pay for necessities. They had very little insight into their company’s financial position, which meant that decisions were made on a whim.

Fast-forward two years and the owners at Avonlea Labels say that the decision to hire a CharterNet VCFO has paid off handsomely: the company has recently shifted from a small to medium-sized enterprise and has experienced 25% growth in this financial year to date. How did this happen? Keep reading.

Let us be your sounding board

We often hear business owners say, “no one knows my business better than me.” We agree. Our VCFO service is not about telling you how to run business. The key purpose of a VCFO service is to give you timely and accurate financial information and meet with you regularly as a sounding board to help you to make good financial decisions. This is all with a view to helping you to do what you do best and focus on the growth and success of your business.

Ask us for a complimentary consultation

Get in touch today to be eligible to receive a complimentary consultation on how a CharterNet VCFO could change the way you do business.

4 Federal Budget factors for SMEs

May 11, 2017

People commuting to work image

The pundits are calling the 2017/2018 Federal Budget ‘centrist and populist’ following Treasurer Scott Morrison’s May 9 announcement speech. While issues such as housing affordability and reining in the big banks created a wall of chatter, changes affecting small business – beyond the recently announced Enterprise Tax Plan – were minimal.

So what do you need to know now?

1. Capital gains tax concessions

The tightening of capital gains tax (CGT) concessions for small business will deny eligibility for assets unrelated to the small business effective from 1 July, 2017.

The concessions currently in place assist SME owners by providing relief from CGT on assets related to their business, helping them to reinvest and grow as well as contribute to their retirement savings through the sale of the business. According to Budget Paper No 2, however, “some taxpayers are able to access these concessions for assets which are unrelated to their small business, for instance through arranging their affairs so that their ownership interests in larger businesses do not count toward the tests for determining eligibility for concessions.”

The small business CGT concessions will continue to be available to small business taxpayers with aggregated turnover of less than $2m or assets of less than $6m.

2. $20k asset write-offs

It’s welcome news that the $20,000 instant asset write-off will be extended to 30 June, 2018, for businesses with an aggregated annual turnover of less than $10m.

Small businesses may immediately deduct purchases of eligible depreciating assets costing less than $20,000, provided they are first used, or installed ready for use, by 30 June, 2018. A few assets, such as horticultural plants and in-house software, are ineligible, so check carefully before you splash out.

Depreciating assets valued at $20,000 or more (which cannot be immediately deducted) may continue to be placed into the general small business pool and depreciated at 15% in the first income year, followed by 30% thereafter. The pool may also be immediately deducted if the balance is less than $20,000 over this period.

The current ‘lock-out’ laws from the simplified depreciation rules will continue to be suspended until June 30, 2018. These rules prevent small businesses from re-entering the simplified depreciation regime for five years if they opt out.

From July 1, 2018, the immediate deductibility threshold, and the balance at which the pool can be immediately deducted, will revert to $1000.

Once again, according to Budget Paper No 2, “This measure is designed to improve cash flow for small businesses, providing a boost to small business activity and investment for another year. It is estimated to have a cost to revenue of $650m over the forward estimates period.

3. Prohibition of sales suppression technology

The government is acting to prohibit the manufacture, distribution, possession, use or sale of electronic point of sale sales suppression technology and software, which allows businesses to understate their income by deleting selected transactions and tax owing from this income is not reported to the Australia Tax Office.

The prohibition will take affect from the date of assent of enabling legislation.

4. Extension of funding to the Black Economy Taskforce

The government is providing additional funds of $32m to extend the ATO’s audit and compliance programs targeting black economy risks.

The Taskforce’s programs focus on businesses that have disengaged from the tax system and are directed at changing black economy and related behaviours such as non-lodgement, omission of income and non-payment of employer obligations.

Changes to superannuation and employment of overseas workers may also affect your business.

Want more info?

Please get in touch to find out more information and learn how the changes apply to you.

Own a small business? Find more out more about the government’s range of support measures here.

The numbers man who weighed up the odds

May 4, 2017

Sameer Kassam image

Interview by Tim Mullen, Partner at See The Forest

Sameer Kassam isn’t your typical accountant. Far from the stereotypical image of someone in a crisp pressed shirt, plain coloured tie, gelled hair and glasses, Sameer looks more like a young startup founder – and that’s because he is.

We’re in a meeting room in his offices in the heart of Sydney’s CBD. It’s a Friday and despite his usual attire of a well tailored suit, Sameer is sitting across from me in a plain white tee, jeans and trainers. He’s well groomed and despite his casual nature carries with him a distinct air of professionalism.

I’ve worked with Sameer for a few years now. His firm is called CharterNet, something he started with Co-Founder Saeed Mirzakhani 6 years ago after the pair saw a gap in the professional services being provided to early-stage businesses.

The duo come with considerable credentials; both are ex-big four, PWC to be exact. Deciding to leave the corporate life they first cut their teeth in smaller boutiques to give them the experience needed to eventually make the jump to building something for themselves.

Today, they have a clear focus, drawing on their strengths in both government grants and CFO and tax advisory services.

Keep reading the interview

Thinking inside the box: A case study with Carrington Associates

April 27, 2017

Joaquin Phoenix in 'Her'

In the Spike Jonez film Her, a talking operating system with artificial intelligence, known as Samantha (played by Scarlett Johansson) – explains her (not so basic) capabilities by stating, “Well, basically I have intuition. I mean, the DNA of who I am is based on the millions of personalities of all the programmers who wrote me. But what makes me is my ability to grow through my experiences. So basically, in every moment I’m evolving, just like you.”

Artificial intelligence (AI) and machine learning – when a machine mimics the problem solving abilities of the human mind – are not concepts limited to the realm of science fiction films. Whether we appreciate it or not, our smartphone, car and home devices make a huge difference to our lives every day by applying reasoning, knowledge, learning and language processing to solve problems. The AI industry is booming. In 2016 cognitive systems and AI technology amassed $US8 Billion in revenue.

How did this happen?

In the last decade, cognitive technology like IBM’s Watson has changed the way computers interact with unstructured data, creating what analysts are calling a ‘snowball effect.’ In 2011, a Watson computer, running software called Deep QA, famously competed against two people on the TV quiz show Jeopardy! and won. Watson did this by sourcing and analysing unstructured data more efficiently and effectively than standard search technology. This potential sparked the attention from Sydney-based software developers at Carrington Associates.

Carrington Associates partners with tech leaders Oracle, Actuate, and more recently IBM, to design and develop business intelligence solutions. Over the last decade, Carrington Associates has been at the forefront of creating innovative solutions for its customers spanning government, education, automotive, manufacturing and other industries. Since the company embraced IBM’s Watson platform three years ago, it sharpened its focus on cognitive learning applications. And, it’s paying off. Carrington Associates has been cited in IT publications including ARN for “leading the race to cognitive competence.”

As far as the company’s Directors see it, the possibilities are endless. Sachin Khisti, Managing Director of Carrington Associates believes that cognitive computing can apply to any area where machines can perform actions that are usually  carried out by  way of reasoning abilities of humans. Identifying signs of melanoma using a smart phone camera or gathering intelligence about someone’s emotions by analysing a voice on a phone call are two examples.

A chance meeting

Early last year, Sachin met Sameer Kassam, Partner at CharterNet, at an industry event. After talking with Sameer, Sachin validated his suspicions that Carrington Associates was undertaking activities that fulfilled the criteria of the Australian Government’s R&D Tax Incentive. In April 2016, CharterNet worked with Carrington Associates to submit the company’s first R&D Tax Incentive claim.

Sachin says CharterNet has eased the uncertainty that comes from taking on a complex grant application. “They [CharterNet] give us very detailed information about how the R&D Tax Incentive works,” he said.

Sachin Khisti, Managing Director, Carrington Associates

“The R&D Tax Incentive guidelines are black and white; there’s no grey area.” ~ Sachin Khisti

 

“From the start, CharterNet understood our business and activities thoroughly,” said Sachin. “They took great interest in our activities and asked far-reaching questions, which gave us the impression that these people know their business well.”

Despite the technical nature of the subject matter, Sachin says he was pleasantly surprised by the CharterNet teams’ expertise in software and their ability to understand how AI technologies are applied in different business environments. By working together, CharterNet has given Carrington Associates a grounding in how their specific software activities provide solutions to an industry problem.

“We’ve discovered a lot,” said Sachin. “We’re continuing our R&D journey as we get confidence in the program. This financial year, we’re more organised; we’ve been keeping better records.”

Results

Since receiving its R&D Tax Incentive refund for FY15, Carrington Associates has recruited two new staff members with specialist skillsets and increased staff training and learning opportunities.

“Being able to train more staff has had a knock-on effect in becoming an employer of choice for young and ambitious technology professionals,” Sachin said. “It’s a great way to attract, motivate and retain digital natives.”
When asked to provide advice for other emerging companies, Sachin explains that detailed documentation is a must. “Companies should capture evidence in real time to prove how their initiatives fit the Incentive’s criteria.”

Talk to humans

Get in touch with the CharterNet Partners today to have an initial discussion about how we can help strengthen your R&D Tax Incentive application for FY16 before the 30 April cut-off.

 

A lower tax rate for small businesses. How do new cuts affect you?

April 18, 2017

Artist painting image

by Saeed Mirzakhani, Partner

More than three million small Australian businesses now have a lower tax rate. Is yours one of them?

Last year, Prime Minister Malcolm Turnbull’s “jobs and growth” catchphrase was inescapable. At the heart of Turnbull’s 2016-17 budget was the Ten Year Enterprise Tax Plan, designed to (yep, you guessed it) support jobs and growth. There’s been times during the last year where it looked like no part of the Plan was going to get up, but thankfully, the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 – comprising tax rate cuts for businesses – was passed by the Senate late last month.

I own a small business, what do these new cuts mean for me?

 

Under this new arrangement, more than three million small Australian businesses will now have a lower tax rate – supporting you to grow your business in a sustainable way.

The amendments see businesses with a turnover of less than $10 million get a reduction in their tax rate to 27.5 per cent this financial year (down from 28.5 per cent). And, over the next ten years, the company tax rate will drop to 25 per cent for businesses with an aggregated turnover of less than $50 million.

This Bill also increases the small business entity turnover threshold. So, businesses with a turnover of less than $10 million will now be able to access a range of concessions that were previously only available to those businesses with a turnover of less than $2 million.

Other concessions documented in the Ten Year Enterprise Tax Plan include:

  • Simplified depreciation rules
  • Simplified trading stock rules
  • A more streamlined method of paying PAYG instalments
  • The option to account for GST on a cash basis and pay GST instalments as calculated by the ATO.

Are these changes a good thing?

 

Yes, we deem they are. But, here at CharterNet, we also believe there’s always room for improvement. And, this Bill is no different. While we welcome the tax cuts the amendments afford, there’s still more to be done to give small and medium-sized businesses the support they deserve.

However, the great news is that the savings these tax cuts provide can be reinvested back into the business. This can mean affording new technologies, having access to more professional development opportunities or being able to resource more R&D activities.

When do these changes come into play?

 

As suggested by its name, the Ten Year Enterprise Tax Plan is designed to roll out a succession of cuts to corporate tax rates over the next ten years. From this financial year, businesses with annual turnover of up to $10 million will have their tax rate lowered to 27.5 per cent. This will then drop to 27 per cent by 2024-25, and to 25 per cent by 2026-27.

From 1 July 2017, companies with a turnover of up to $25 million will get the 2.5 per cent reduction to 27.5 per cent, with the drop then applying to businesses under $50 million in the 2018-2019 financial year.

Need more info?

 

Please get in touch to find out more information and learn how the changes apply to you.

Own a small business? Find more out more about the government’s range of support measures here.

* While the Bill was passed with government amendments by the Senate on 31 March 2017, the amended Bill is expected to be re-introduced into the House of Representatives for passage in early May 2017.

 

 

Down and dirty: A case study with StrangeLove

April 5, 2017

StrangeLove dirty tonic image

Think of research and development (R&D) and you may be taken to a world of white lab coats, conical flasks and wraparound safety glasses. So, if you’re working for a fledgling beverage company, you’d be forgiven for thinking R&D funding wasn’t meant for you. But, as you’ll come to see, StrangeLove isn’t like other drink companies.

CharterNet began working with StrangeLove, an organic soft drink and craft mixer company, three years ago. It was a flavourist – helping to perfect the now renowned Strangelove concoctions – who told James Bruce, StrangeLove’s co-founder, about the Government’s R&D incentive. After taking to Google to find out more, James came across a Sky News interview with CharterNet’s Sameer Kassam discussing the R&D Tax Incentive.

James describes his working relationship with the CharterNet team as “just dreamy.” Keep reading to find out why:

Challenge

When you look at the soft drink industry, you start to notice a bit of a trend – flavours are pretty nondescript: no offensive bitter or spicy ingredients, lots of sugar. However, StrangeLove isn’t one to follow trends or appeal to the masses. Au contraire; its flavours, packaging and descriptions are designed to polarise. Organic soft drinks like the Ginger Beer ‘stolen from Grandpa Mike’s basement’ or the Blood Orange and Chilli that’s ‘the next best thing to real emotions’ aren’t soft drinks for ‘stupid, dumb babies,’ they’re elixirs for adults.

 

StrangeLove classic cola image

 

 

From day dot, the StrangeLove concept had naysayers – supporters of the status quo –declaring, ‘you can’t do that.’ James explains that in Australia we may be engineered to think in this way: everything from glass bottles to the contents within them is stock standard or middle of the road.

“Maybe it has something to do with us being a small island,” he said. “But, when you’re told you can’t do something you only want to do it more. It’s like a war that’s been waged.” What StrangeLove needed was the financial support to prove: yes, we can.

In 2014, James began working with the CharterNet team. Initially, it was out of necessity more than anything else.

“When I found out about the R&D Tax Incentive, I had 24 hours to get an application in,” James said. “I spoke to Sameer at CharterNet and he said, ‘we’ll get it done.’”

 

Solution

StrangeLove and CharterNet’s relationship was full speed ahead from the get-go, with the first goal to secure the R&D Tax Incentive.

By this stage, StrangeLove was already experiencing growth. Through implementing CharterNet’s skill and expertise in technical writing and their nous in efficient record keeping, Strangelove’s application for the R&D Tax Incentive was successful.

“In my job, I deal with a lot of people,” said James. “Coming across someone like [CharterNet’s] Sameer is a very rare find. He’s one in one hundred. Working with him is easy; his advice is always right and he gets on with the job.”

CharterNet now supports StrangeLove beyond its R&D Tax Incentive capacity – helping with financial aspects of the business like accounting, tax and advisory. “CharterNet is an essential part of our business,” said James.

Results

In the three years StrangeLove and CharterNet have been working side by side, the drinks company has doubled its revenue each year. And, this year, James says the company is on its way to doubling again.

James admits that it was hard for him to believe that all this would be possible in an industry controlled by a few big players. “I’d go as far as to say we wouldn’t have survived without the R&D tax incentive,” James said. “They’ve [CharterNet] brought expertise to the table and saw things that I couldn’t see.”

James says working with CharterNet has afforded them peace of mind, as well as a greater understanding of how to use financial data to inform decisions and strategy.

StrangeLove lemon squash poster image

 

When asked to offer advice to other start-up companies, James laughed and said, “quit and get a day job.” All jokes aside, James explains that to the best way to be ahead of the curve is to “get CharterNet on board as soon as possible.”

While less reputable consultants might not champion their own work, James said CharterNet works hard to ensure their clients’ applications are successful.

“CharterNet won’t submit anything they won’t endorse. The buck stops with them and they’ll defend any audit.”

Thirsty for more?

Get in touch today to discuss how CharterNet can help you manage your claim for the R&D Tax Incentive in FY16 before 30 April.

Or, to get your hands on a home-made soft drink ‘without having to talk to old people,’ visit the StrangeLove website.

6 government grants for Australian businesses

March 29, 2017

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by Sameer Kassam, Partner

 

Securing a government grant often gives businesses peace of mind – especially small and medium enterprises across Australia who need financial help to promote growth. However, many eligible businesses are missing out. For example, we know that 70% of eligible Australian businesses aren’t receiving the Australian Government’s Research and Development Tax Incentive.

There’s nothing worse than seeing a small business owner working so hard, only for grant opportunities for which they’re entitled to go by unnoticed. But, it makes sense. Finding out about grants – let alone lodging an application – is hard work.

Luckily, the CharterNet team are experts in this niche and have secured over A$100m in grants for their clients to date. Read on to discover six government grants that might be available to your business and how we can help.

1. Research and Development Tax Incentive

 

Businesses of all sizes may be eligible for the Research and Development (R&D) Tax Incentive. Administered by the Australian Taxation Office and AusIndustry, the grants offer a generous tax offset that’s dependent on a business’s revenue. The R&D Tax Incentive encourages R&D activities that benefit the Australian economy and it’s accessible to all industry sectors. Conducting R&D activities for the purpose of generating new knowledge? You might be doing R&D without even knowing it. If you think your business or workplace is conducting R&D, get in touch today.

Who: Eligible businesses of all sizes across Australia.

What: A tax offset based on revenue, that may result in a cash rebate.

When: The deadline for FY16 R&D Tax Incentive submissions is 30 April 2017.

 

2. Export Market Development Grant

 

The Export Market Development Grant (EMDG) scheme is an Australian Government program that encourages small and medium-sized Australian businesses to develop export markets. It helps a wide range of industry sectors and isn’t just product based – also comprising inbound tourism and the export of intellectual property and know-how beyond Australia’s borders. To be entitled, businesses must have spent $15,000 or more on the promotion of their export. Are you part of an aspiring and growing export-ready business? CharterNet has a team of experienced consultants who can help prepare EMDG claims on behalf of your business. Get in touch today.

Who: Australian businesses who’ve spent $15,000 or more on the promotion of their export.

What: Businesses are reimbursed up to 50% of eligible promotion expenses above a threshold of $5,000, provided that their total expenses amount to more than $15,000.

When: Applications are now closed.

3. Minimum Viable Product Grant (NSW only)

 

Eligible for start-ups with an ABN registered in NSW, the Minimum Viable Product (MVP) Grants help capable technology start-ups by providing the financial support needed to collect customer feedback and trial their core business model. These grants reflect the need for innovation and aim to support start-ups (yes, even those yet to generate revenue) in engaging with potential customers or channels to market. It’s available to across a wide-range of sectors, with conditions here.

Who: Primarily for start-ups. NSW only.

What: Eligible start-ups can receive up to 50% of approved project costs (maximum of $25,000).

When: Now open.

 

4. Small Business Grant (NSW only)

 

Administered by the Office of State Revenue, the Small Business Grant is designed to help small businesses in NSW to hire new employees and expand their business. In essence, the benefit of this grant is in providing some relief for payroll tax. The grant finances employers up to $2,000 per new employee for businesses that don’t pay payroll tax. It’s payable after the first anniversary of the hire of a new employee.

Who: Small businesses in NSW.

What: Up to $2,000 per new employee. The $2,000 grant is paid pro-rata for part time employees.

When: Now open.

 

5. Entrepreneurs’ Programme

 

In 2014, the Commercialisation Australia and the Innovation and Investment Fund were revamped, resulting in the Entrepreneurs’ Programme we know today. The Programme is the Australian Government’s flagship initiative for competitiveness and productivity – offering support and advice to Australian businesses on how to innovate and grow. This advice is given through four elements:

  • Accelerating commercialisation
  • Business management
  • Incubator support
  • Innovation connections.

Eligibility criteria across the four streams can be found here.

What: Practical support for businesses. Different support provided across the Programme’s four elements. More information here.

When: Applications are open on an ongoing basis.

 

6. Community grants

 

Grassroots community grants – often administered by local government – regularly go unnoticed, as businesses are attracted by the glitzier pull of state and federal funding. But, these smaller-scale grants are a great way to secure funds, contribute to the economic development of your local area and build valuable relationships with others (think businesses, groups and individuals) in the community.

Community grants are made available throughout the year by local government and application dates vary. From business improvement grants to cultural grants for creative projects. Get in touch with the council where your business operates for more information on available grants.

We can help

 

Grant submissions require specialised help. CharterNet’s experienced and dedicated Government Grants team can assist your business with Research and Development Tax Incentive, Export Market Development Grant and Minimum Viable Product Grant applications.

Get in touch today if you have any questions about your eligibility and how we can help. And don’t forget, the deadline for FY16 R&D Tax Incentive submissions is 30 April 2017.

7 signs you’re doing research & development (and don’t even know it)

March 13, 2017

7 Signs You're Doing Research & Development

By Alan Baghdasarayan, Senior Manager, R&D Services

 

Statistics show that 70% of eligible Australian businesses aren’t receiving the Australian Government’s Research and Development Tax Incentive. There is a chance that your workplace may be carrying out research and development (R&D) activities without even knowing.

The Incentive helps support new knowledge generation by providing a generous tax offset to Australian businesses developing innovative products and new ways of doing things for the benefit of Australia. Keep reading to discover seven R&D activities you might have overlooked.

Does your business/workplace:

1. Design and develop products from start to finish?

 

Existing solutions, often referred to as ‘off-the-shelf’ products, are usually the cheapest and quickest answer to a problem: you don’t need to reinvent the wheel and you’ll avoid spending time and money on development. But, if your business has looked into using or customising existing products, services, devices, processes or materials without success, then chances are your next move is to design from scratch. If this is the case, you may be eligible for the Incentive.

 

2. Outsource research activities?

 

Does your business use a specialised firm to carry out research? If the outcome of your research activities can’t be determined in advance – but can only be substantiated by carrying out an experimental progression of work – then it may well be eligible for the offset.

Research is a highly dedicated field, and even the biggest companies outsource enquiry to external providers to hunt for new knowledge. For example, we work with telecommunications companies that use specialised external agencies to conduct scientific research into their products.

 

3. Have lots of expenses, but little sales?

 

A common trend for businesses undertaking R&D activities is a high expenditure to sales ratio. Claiming the R&D Tax Incentive has generous benefits available for companies that are investing in this way for the long-term.

This kind of ratio is expected in the early days of a start-up – where investing money both upfront and during the development phase is anticipated. But, if you run an established business that’s still operating at a loss, it’s because you need help managing your financials, or you’re investing in R&D for a long-term benefit.

 

4. Try to solve a common industry problem?

 

Commonly, a business launches because the owner(s) thinks they can offer something new or improved to the market. But, this isn’t as easy as it sounds. Instead, entrepreneurs may try solve an industry problem, which can make them eligible for the R&D Tax Incentive.

In the software industry for example, companies are having an increasingly difficult time with designing and developing new complex algorithms to interrogate its big data in order to form a specific module of a client service offering. These new complex algorithms are better than the industry standard. By doing so, companies like these are attempting to solve a common industry issue in a unique manner with superior capabilities, i.e. handling big data analytics, and may be eligible for the offset.

 

5. Have job titles like Innovation Manager, R&D Engineer, and Research Scientist?

 

It may sound obvious, but if your business employs people with job titles such as “Innovation Manager” or “Product Developer” then you’re on your way to being entitled to the Tax Incentive.

These roles are often focused on researching, designing, or developing something new or improved, and, as long as you can prove it, your company may be eligible for The Inventive.

Tip: When preparing your application, it’s important to include position descriptions of the employees conducting R&D to substantiate your claim. Ask us for help.

 

6. Undertake trials that lead to large amounts of dumped goods?

 

Does your company have excessive ‘wastage and dumped goods’ costs on its profit and loss statement?

Sometimes, you can’t know the result without undertaking trials and testing. We see this a lot in the fast moving consumer goods industry. For instance, if a health food company is looking to engineer a new type of soy milk that’s markedly different from those available, it’s going to go through extensive testing. While the milk might be suitable in lab trials, there could be issues during large-scale testing and production, resulting in thousands of litres of stock being flushed down the drain. If your company has substantial costs attributed to dumped products until it successfully designs a product, it could be a sign you’re conducting eligible R&D activity.

 

7. Licence new technology and trial its use?

 

Is your company pursuing the use of innovative technologies? If your company is acquiring or licensing technologies to build a better process off the back of it, it could be an indication it’s undertaking R&D.

For instance, some companies are working with IBM’s Watson – a cognitive system enabling partnership between people and computers – to address a problem. Using Watson’s intelligence and forecasting capability, one of our clients is trying to improve traffic flow and reduce car congestion.

We can help

Get in touch today if you think your company may be entitled to the R&D Tax Incentive. The deadline for FY16 R&D Tax Incentive submissions is 30 April 2017.

 

 

 

The need for a virtual CFO: A case study with Avonlea Labels

March 6, 2017

The need for virtual chief financial officers (VCFOs) in fast-growing small and medium-sized businesses is intensifying.

The need for virtual chief financial officers (VCFOs) in fast-growing small and medium-sized businesses is intensifying. In order to make smarter business decisions for growth, savvy business owners are outsourcing to experts so their staff can focus on what they do best.

In 2015, the CharterNet VCFO team, led by Saeed Mirzakhani, started working with Avonlea Labels – a leading Sydney manufacturer of high-quality adhesive labels. At the time, the business owners at the label company knew their company was prospering, but couldn’t understand why they couldn’t find the budget to pay for necessities. They had very little insight into their company’s financial position, which meant that decisions were made on a whim.

Fast-forward two years and the owners at Avonlea Labels say that the decision to hire a CharterNet VCFO has paid off handsomely: the company has recently shifted from a small to medium-sized enterprise and has experienced 25% growth in this financial year to date. How did this happen? Read the case study:

Challenge

 When CharterNet first met the Avonlea Labels team, they weren’t looking to engage a virtual CFO. Instead, they wanted an accountant to help them understand their numbers better. Although they could see value in a VCFO with experience from the ‘big four,’ the owners felt their lean business model couldn’t afford them the opportunity.

“I had difficulty convincing my company to invest in a VCFO service because we didn’t understand our numbers, and we felt that we didn’t have the funds for it,” said Matt Ellis, General Manager of Avonlea Labels. “However, putting it off was only stunting our growth further.”

Faced with mounting pressure to make strategic business decisions for the future, Avonlea Labels needed help, and fast.

Solution

Avonlea Labels decided to trial CharterNet’s VCFO service for one quarter with a view to committing further thereafter dependant on the value received.

“If we don’t gain our client’s investment back and much more, we’re not doing our job,” explained Saeed Mirzakhani, Partner at CharterNet.

CharterNet got the ball rolling by first understanding the company’s needs through an exhaustive investigation of their financial circumstances. By drilling down into the numbers, CharterNet gained an in-depth awareness of budgets, including fixed costs and what the company needed per month to keep the doors open.

After transitioning Avonlea Labels to Xero, CharterNet’s preferred, powerful cloud-based accounting software, CharterNet implemented a reporting add-on to provide real-time analysis to the Avonlea management team. This would allow Ellis to get a better overview of his company’s finances on a daily basis, and improve team collaboration by making data accessible online.

With the systems in place to collect and analyse data, the CharterNet team began to advise on expenditure, as well as implement a baseline financial strategy in the way of budgets, forecasts and cash flow management.

“Saeed and his team provided financial logic rather than just gut feelings,” said Ellis. “For example, while we had always invested in marketing, we had little awareness of how much we should be spending to ensure a good return. Now, we can make educated decisions that I know will pay off.”

Results

 Ellis describes his decision to continue with the VCFO service as a ‘no-brainer.’ In the two years that CharterNet and Avonlea Labels have been working together, the label company has experienced 25% growth to date, and moved to a medium-sized business.

Ellis says that since working closely with Mirzakhani of CharterNet, Avonlea Labels has become more strategic, and has invested wisely in marketing, better systems, processes and procedures.

“We’ve never been more aligned and effective, and it’s purely driven by understanding our numbers,” Ellis said. “We’ve promoted two people and invested $10,000 in systems.”

When asked to offer advice to other growing companies, Ellis said, “knowing what I know now, I’d say that you’d be crazy not to engage a VCFO.”

“Without them [CharterNet], it’s like driving a car one hundred kilometres per hour down the freeway blindfolded.”

By using a VCFO, the decision-making process at Avonlea Labels has transitioned from what Ellis described as an ‘on a whim’ mentality to a clear strategy dictated by an understanding of numbers.

And, as for hiring a permanent CFO?

“There’s no need for a full-time role,” explained Ellis. “Plus, they [CharterNet] have exposure to a lot of industries, which benefits us. It means that they can apply knowledge from real-life examples.”

Ask for a complimentary consultation

CharterNet has helped Avonlea Labels build a stable foundation to propel exponential growth.

Get in touch today to be eligible to receive a complimentary consultation on how a CharterNet VCFO could change the way you do business.