Business Plus Newsletter – July 2021

The Research and Development Tax Incentive Rebate is of tremendous assistance to companies that have undertaken research activities.

The rebate amount was changed from 1st July 2021.

There was virtually no change for a company with a turnover under $20M.  The new rebate, which is a refundable benefit, is the “appropriate corporate tax rate that applies for that company +18.5% premium”.

The government has indicated that, from 1st July 2021, the small company tax rate will be 25%, meaning that the Research and Development Tax Incentive Rebate will be 43.5%, which is the same amount as it has been for the last few years, but with a different set of components in the calculation.

There has been significant changes to the non-refundable rebate for companies with turnovers between $20M and $50M.

Companies which spend up to 2% of their total expenditure on research and development will be deemed to have a research and development intensity of 2%.  This will be referred to as “2% Research and Development Intensity” and they will receive a non-refundable research and development tax offset of the appropriate corporate tax rate +8.5% premium.

With the corporate tax rate expected to be 25% the companies in this category, this will have an effective research and development rebate of 33.5% of the eligible research and development expenditure.

Where companies in the $20M – $50M category spend more than 2% of their total expenditure on research and development, they’ll have a research and development intensity of over 2% and the premium will be 16.5%.

Based on the corporate tax rate of 25%, companies in this category will have an effective research and development rebate of 41.5% of the eligible research and development expenditure.

The “refundable benefit” for companies with a turnover under $20M means that, if the company is trading at a loss, the company can elect, within its tax return, to receive a cash refund of the research and development rebate so long as the company’s losses exceed the amount of the research and development rebate.

If you are interested in finding out more information on the research and development scheme, please do not hesitate that to contact us for a discussion.

If your company needs additional funding and your group turnover is under $25M, your company may be able to utilise Crowd Sourced Funding Equity Raising to raise up to $5M, in a 12 month period, from the public.

You can raise this capital without having to mortgage assets or issue personal guarantees.  The company has to allocate ordinary shares to the investors.

To go through this process the company will need a Business Plan that clearly articulates the directors’ and leadership team members’ vision for the company and the strategies that they intend to implement so that the vision can be achieved.

Crowd Sourced Funding Equity Raising has been introduced by the government making amendments to the Corporations Act so as to facilitate this type of capital raising.

There is a process for the directors and leadership team members to participate in to have a clear understanding of how this system of raising capital operates.

A company has to work with an accredited Crowd Sourced Funding Intermediary (who has been appointed by the Australian Securities and Investments Commission) who has the authority to approve a company to be able to use the Crowd Sourced Funding Equity Raising process.

If you have any interest in this process or questions, please do not hesitate to contact us.

Business Plans are like maps for tourists – you need a plan for where you are intending to go, what you want to look at, where you are going to stay and, if you deviate off track, you need to be able to identify where you’re at and then navigate to get back onto your original path.

Planning a business activity is very similar.

The Business Plan should incorporate commentary from the people involved in the business – directors, owners, shareholders, leadership team and other team members, together with a summary of the strategies that have been developed, the tactics for the implementation of those strategies and the allocation of responsibilities for monitoring the supply of funding for the business.

A new financial year has just commenced.  This is a great time to be planning what you’re going to do in your business during 2021/22.  With the continuation of COVID-19 causing problems all over Australia, there is going to be ongoing problems, particularly for businesses, until the immunisation rates are at the level required for “herd immunity”.  In the meantime preparing a “realistic but flexible” Business Plan can give you a map for the conduct of your business until something approaching “normal business conditions” emerges.

If you would like to discuss with us the development of a “realistic but flexible Business Plan” for your business, please contact us.

A good Business Plan contains a commentary on the strategies to be implemented over a range of activities as well as the business’ vision.

“Predictive Accounting” creates a “financial picture” of the visions and strategies by preparing four key documents:

If you would like to discuss with us the concepts involved in the development of a “financial picture” for your business, please do not hesitate to contact the person in our organisation with whom you normally deal.

Virtual Chief Financial Officer (CFO) services are provided by accountants who have wide commercial experience in a range of business activities to assist growing SMEs.

A key aspect of the role is to be able to “dig down” into the business’ records other than just to extract key financial data.

Virtual CFOs are performing this function for small or growing businesses that haven’t yet reached the scale to justify the investment in a full-time CFO.

The engagement of a virtual CFO fills a void in SMEs’ commercial financial management capability by providing high value, essential strategic financial management advice and enabling business owners to focus on commercial matters within their business and in dealing with their own clients.

Any business that is contemplating “scaling up” possibly by approaching external investors, will benefit by being able to indicate to those investors that a virtual CFO engagement with their accounting firm is assisting the leadership team in the development of the key financial policies for the business.

If you are interested in exploring the concept of utilising a virtual CFO Service, please contact the person in our organisation with whom you normally deal.

“Scaling up” is a process that normally follows after the Business Plan has been finalised incorporating the vision for the business.

“Scaling up” requires the following key items to be attended to:

The leadership team needs to have been able to develop “workable strategies” for every aspect of the business.

We then come to the challenging part of a scaling up process and that is the “implementation of the strategies”.  This is a major commitment to ensure that the business will operate in accordance with the vision.  Unless there is commitment to implement the vision, it probably will not happen!

Businesses need “money” to implement their strategies.  The leadership team needs to have a complete understanding of the financial position and to have developed strategies to raise additional funds, loans or capital from the public, if need be, to ensure that sufficient funding is available.

“Scaling up” is a process that is available for every company/business that has a vision.  If you would like to have a discussion with us about the process to implement a scaling up strategy for your business, please contact the person in our office with whom you normally deal.

That’s great – but there are a few issues that you should think about before starting a business or purchasing a business.

Unfortunately, there is a high failure rate in the first 3 years of a business’ life.  An accountant’s role is to advise you on systems and processes that will contribute to your business being successful.  Some of the problems which confront new business operators include:

Successful small and medium-sized business operators establish a network of key advisors who can assist them very early in their business careers.  The key professional advice areas include:

If you are contemplating starting or buying a business, please don’t hesitate to contact any of the accountants within our firm for a discussion.