In accounting terms, the July 1 introduction of the government's controversial new carbon tax will present dramatic changes for Australia's 500 largest businesses.
However, if you're like the majority of businesses that fall below that mark, the carbon tax will have little direct impact. Instead, experts say, small-business owners should focus on their end-of-year depreciation strategies to ensure they're managing their technology spend in the most tax-effective manner.
If you're buying technology-related assets, one change in tax regulations is well worth considering. This is a change in the small-business instant asset write-off threshold to $6,500: from July 1, you can take a straight deduction for the full price of any capital asset purchased up to this amount.
The implications of this change may be surprising, points out Sydney-based accountant, 'Mr Taxman' Adrian Raftery: "If you're thinking about buying an asset that's over $1,000 on June 30, wait to buy it on July 1 and you'll get the write-off for the full amount in the 2012-13 year," he explains. "This is the opposite of what we're always told to do -- to buy by June 30."
Raising the straight-deduction threshold will allow small businesses to refresh their desktops and servers with more favourable tax benefits; by deferring your purchase until after July 1, you'll be able to claim the entire business-related purchased expense in your 2012-13 return, rather than buying it now and then having to put the asset on an amortised depreciation schedule over many years.
Also kicking in for 2012-13 is a change that allows most business assets to be depreciated in a single pool at a flat rate of 30%. This is a move designed to simplify past depreciation-scheduling arrangements, which have used different rates for different types of assets.
This change may be useful in some situations, but technology purchasing isn't necessarily one of them. That's because, while some conventional capital assets may enjoy an increase in depreciation rate thanks to this new rule, technology-related purchases have traditionally been depreciated at higher rates of 40, 50 or even 66.6%.
Cutting this to 30% would represent a lower depreciation value and assume a longer usable life than most technology products enjoy. So, if you're buying a bunch of iPads for your staff, don't bother pooling them under the new rules; deduct each one separately.
"You want to depreciate your computers individually rather than having them in the pooled rate," says Raftery.
Last-minute spending
As well as prompting you to revisit your technology-acquisition strategies, June is a great time to review your business operations and plan out the year ahead. Do an inventory of your capital assets and supplies, and consider writing off anything that's obsolete or near the end of its usable life; document and write down stagnant bad debts; revisit logbook strategies for vehicles.
And while the new rules mean you may want to defer purchases of specific items, all the old rules still apply as you head towards the end of the fiscal year. It's a great time, for example, to replenish your supplies of stationery, laser-printer toner and inkjet cartridges – particularly if you can tap into EOFY sales offering extra discounts.
Just remember: deducting supplies doesn't mean they're free – only that you save the 30% tax you would have paid on them. So don't go overboard: "Don't spend money unless you have to," Raftery advises.
Another common tip is to prepay regular services: tax legislation allows you to prepay up to 12 months' worth of subscription services. In a world where cloud-based applications are becoming more and more common, this option may provide a useful deduction if your small business is paying regular subscription fees for such tools. Also consider recurring costs such as domain-name registrations, web site hosting fees, security-software subscriptions, technical support contracts and the like.
Although nobody's sure exactly what effect the carbon tax will have on the price of products and services, it may be particularly prudent to prepay your recurring service expenses this year, since many have predicted that a trickle-down effect could see price increases in areas that involve heavy resource use.
An obvious candidate would be data-centre hosting, since data centres consume huge volumes of power and their operators will have to pass off any carbon tax-related increases in electricity to their customers. If they'll allow you to prepay a year's services, you can effectively lock in an additional year of service at the current, lower rate (note that this won't work for your utilities, which typically work on a rolling-usage basis and will only apply prepayments as a credit balance. If prices rise, that usage will be charged at the new rates).
As always when it comes to technology purchases, the right decision can be worth hundreds or thousands of dollars. By planning ahead at EOFY, you can save a bundle come tax time.
