The Pulse

Consider claiming for Research & Development (R&D) Incentive

The changes to the R&D concession effective 1 July 2011 are intended to make the incentive more attractive for small & medium sized companies and can result in a refund of 15 cents for every dollar of eligible R&D expenditure.  Eligible R&D activities can occur in a wide range of industries.  Where your company conducts activities which have an objective of generating new knowledge regarding improved materials, products, devices, processes or services and the outcome of these activities cannot be determined in advance, it is worth considering this incentive.

Confirm Eligibility for Small Business Capital Gains Tax (CGT) Concessions

Assessing your eligibility for these concessions can no longer be deferred until you are considering selling your business.  These concessions may result in no tax payable on the sale of your business, however, access to the concessions can depend on the characteristics of your business over the several years leading up to a sale.  These characteristics may be managed in advance to ensure eligibility, but doing so in the midst of a business sale transaction is difficult or impossible.

Confirm Tax Benefits arising from Clarification of Trust Issues

There has been some recent clarification of the tax consequences of arising from use of trusts.  It has been confirmed that trustees have the discretion to define income and more recently the tax legislation has been updated to confirm that trust are able to stream different classes of income (eg capital gains and franked distributions) to particular trust beneficiaries but care needs to be taken as these changes have led to additional complexity when determining trust distributions.

Maximise Use of Prior Year Losses to Reduce Current Income

After the GFC, many taxpayers have incurred significant tax losses.  The use of these losses in future years is subject to a number of tests which can prevent all losses from being offset against future income.  It is particularly important to consider this issue if you are contemplating a change in the structure/ownership of your business entity.

Consider Tax Penalties arising from Non Commercial Loans & Payments to Associates

The rules regarding loans and payments from private companies and certain trusts to associates have been expanded significantly over recent years.  In the case of companies, it is now also necessary to consider the use by associates of the assets of the company as this can also be deemed to be a payment.  With loans and payments being treated as an unfranked dividend in the hands of the recipient, significant tax consequences can arise if the issue is not appropriately addressed.

Steve Fimmano | Partner, Private & Entrepreneurial Clients – BDO