Research and Development Reminder 1
Reportable Payment Reports 1
Early Stage Innovation Company. 1
Trustee Distribution Minutes 2
Payment Summaries, If Not Using Single Touch Payroll 2
Shareholders’ Loans 2
What Strategies Are You Considering For 2021/2022?. 2
Charge Out Rate Calculations 3
Issue – June 2021
Happy End of Financial Year!!
- If your company has undertaken research and development activities during 2020/21, you have conducted part of the research and development activities in an overseas country and you wish to claim that expenditure under the Research and Development Tax Incentive Rebate, you must lodge your Overseas Finding application with the Australian Taxation Office by 30th June 2021. If you need any assistance with the preparation of this application, please do not hesitate to contact us.
- If your company commenced a research and development project during 2020/21 and you would like us to review the records that you have maintained, please contact the accountant in our organisation you deal with as soon as possible.
- If you are giving consideration to undertaking research and development activities during 2021/22, please contact us for a discussion on the research and development recording system that needs to be implemented so that your company complies with the research and development rules as advised by the Australian Taxation Office and AusIndustry.
- Building and Construction Industries
- Courier Services
- Information Technology
- Road Freight
- Security, Investigation and Surveillance Services
If your company has completed the due diligence requirements to be classified as an Early Stage Innovation Company during 2020/21 and you have to raise capital from new shareholders, you are reminded that you are required to lodge the company’s New Investor Statement with the Australian Taxation Office by 31st July 2021.
The minutes of trustee meetings, relative to distribution of trust profits in 2020/21, should be signed by the chair or another of the trustees by 30th June 2021.
These summaries are required to be lodged with the Australian Taxation Office by 14th July 2021.
If your company has made loans to shareholders, the minimum interest rate to be charged in respect of those loans for 2020/21 is 4.52%.
A reminder that the company must have prepared Loan Agreements for each loan and, if the loans are for in excess of 7 years, the borrower is required to submit securities to the company.
The latest shutdown of State borders, the continual discontinuance of most International tourism to Australia and the shortage of labour to work in agricultural areas, highlights that many segments of the Australian economy are still finding it tough, even though the unemployment rate has decreased well below expectations for this time.
This is the background for business operators to be planning operations in this new financial year. As an accounting firm we are committed to offering our clients a broader range of professional services then just the preparation of annual accounts and income tax returns.
Some of our clients are already receiving some of these services to assist them in the implementation of their business strategies. If you are not currently receiving these services, we are interested in hearing from you as to whether you’d like to review the services that we’re providing to you. We have prepared the following summary of some of the strategies that you might like to discuss with us. Please don’t hesitate to contact the accountant in our organisation with whom you normally deal if you require further information on any of these strategies.
This is a fundamental business document that basically every business should have. Our recommendation is that your Strategic/Business Plan should be updated each year so that it reflects your current vision for your business and outlines strategies as to how you’re going to implement that vision.
Budgets, Cashflow Forecasts, Predicted Balance Sheets (This is known as “Predictive Accounting”)
This trifecta of services is developed from the Business Plan and is the “financial picture” of the information contained within your Business Plan so that you can ascertain whether your business needs an injection of additional funding which would come via loans or capital raising direct from the public.
The special COVID-19 loan 50% guaranteed by the Australian government with a maximum loan of $250,000 to be utilised for working capital purposes, closes on 30th June 2021. If you intend to submit an application you will need to do so urgently. If you require assistance in the preparation of the application, please contact us.
There are three opportunities for private companies to be able to raise capital direct from the public, without having to issue a Prospectus. These opportunities are:
- Section 708 of the Corporations Act
- Early Stage Innovation Company
A “young company” – under 3 years of age, but in some cases up to 6 years of age, with a turnover in the last 12 months of less than $200,000 (not including funding from an Accelerating Commercialisation Grant) and expenditure less than $1,000,000 in the last 12 months will have passed the first test to be and Early Stage Innovation Company.
The company is then required to pass one of two additional tests series which are:
- Gateway Test – the company has to accumulate more than 100 points relative to a series of eligibility criteria; or
- The Principles Test – which requires the company to submit written responses to five key questions relative to the company’s ability to be able to successfully develop for commercialisation a new product, process, service, marketing or management methodology.
There is a due diligence test requirement that we can conduct to ascertain whether the company meets the requirements for an Early Stage Innovation Company.The government developed this type of company status to assist young companies to be able to attract investors.
The attraction for investors is that they receive a tax rebate calculated at 20% of their investment in the company with a maximum rebate of $200,000 for sophisticated investors (people with a net worth the $2.5 million or who have earned income of $250,000 in each of the last two years and who produce an Accountant’s Certificate that this information is correct).
If the investors retain their shares for more than 12 months and less than 10 years they do not have a liability for Capital Gains Tax when the shares are sold. If the shares are held for more than 10 years, the cost price of the shares can be revalued in the tenth year, to reflect a higher new cost price.
These benefits make an Early Stage Innovation Company very attractive for investors who have a keen interest in emerging companies which have been involved in the development of new technologies.
- Crowd Sourced Funding Equity Raising
A private company, with a turnover less than $25,000,000 and gross value of assets less than $25,000,000, could consider the requirements for eligibility as a company that can seek to raise capital from the public as a Crowd Sourced Funding Equity Raising Company. These companies are able to raise up to $5,000,000, in a 12 month period, and can return to the market to raise a further $5,000,000 in the following year – subject to market support of course – if they wish.
We can guide you through this process and inform you of the roles and responsibilities of the Crowd Sourced Funding Intermediaries and assist you in the preparation of the documentation, primarily the Crowd Sourced Funding Offer Document, which is based on the company’s Business Plan, Budgets and Cashflow Forecasts.
If you are interested in having a discussion with us about any of these capital raising opportunities for companies, even if you are currently not incorporated as a company, please do not hesitate to contact us
Now is a good time to review the charge out rates that you are using within your business. The key requirements for establishing charge out rates for your team which will generate your targeted profit for the year include:
- Team member classification showing wages, working hours, holidays and other special leave and the productivity that you can reasonably expect.
- The markup that you intend to charge (if any) on materials that you have purchased on behalf of clients for installation on the client’s premises.
- The business’ overhead costs for the 12 month period.
- You can then indicate what your desired profit is for the year – this is normally based on the value of the business.
A similar approach is also taken for the determination of appropriate components of professional charge out rates.Professional firms also relate to productivity being achieved by the individual team members.
In some professional firms there will not be the mark-up on materials purchased for clients.
The combination of estimated working hours, salaries, productivity, overhead costs are then factored into a spreadsheet to determine individual classification charge out rates that, when applied to the productive hours estimate for each person, will generate the targeted profit for the professional firm.
Retail businesses are not “selling labour hours” even though labour is a key cost in operating a retail business.
The key factor within a retail business is the “product mix” which comprises various types of stock that has variable potential units of sale and invariably significant different mark-up rates which can apply to those individual types of stock.
The business’ overhead costs and labour costs need to be budgeted for the year based on the anticipated level of sales.
We can then utilise our calculator to prepare an analysis on various levels of the stock mix over a range of products and mark-up percentages to determine one or more combinations which will generate the targeted profit for the retail business.
This type of approach gives the manager, responsible for an individual retail business, a guide to the type of product mix that they should be trying to generate so that the business will earn the targeted profit.
Business Review Meetings
A business review meeting is a worthwhile investment for a business to make to enable a full review to be undertaken of a business’ performance. This type of meeting is preferably held each month or quarter.
The leadership team should be the key participants in the business review meeting and each of them should have prepared a report on the “portfolio responsibilities” that they have in the business so that their peers can be informed and ask questions, if they wish. It is very desirable that an accurate set of financial accounts is prepared for each business activity so that the Profit and Loss Account and Key Performance Indicator Report for each business activity is available for review.
This process enables an evaluation of the performance within tradie, manufacturing and professional services businesses for which a charge out rate has been established to see whether those charge out rates, together with the productivity being achieved, has generated the targeted profit.
Retailers will benefit from analysing financial accounts to be able to judge the effectiveness of the manipulation of the product mix and charge out rates as part of the challenge of trying to achieve a targeted profit for the business. Other matters which can be considered at the business review meeting include:
- Cashflow Position – what has caused any variance?
- Projected cashflow position for the months ahead – is there a need to consult with the bank now?
- Debtors’ Aged Analysis and, in particular, what is the debtors’ days outstanding figure?
- How is the business performing, as compared to the vision included within the Business Plan?