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Welcome to the April newsletter.
Borrowings by Self-Managed Superannuation Funds
Recently there has been an abundance of articles in the press and in financial circles regarding the ability for self managed superannuation funds (SMSF) to borrow funds in limited circumstances. Naturally this change has attracted a great deal of interest from trustees and members of SMSFs.
Whilst being aware of this change Macquarie Partners has taken a cautious approach to date as we often find the devil is in the detail when significant changes such as these are legislated. In this regard we now note the ATO has issued a taxpayer alert warning trustees to be cautious about entering into certain limited resource borrowings to acquire assets for their SMSF.
Click here to read the alert.
Notwithstanding the above Macquarie Partners are fully aware of the legislation and understand the pros & cons of this potential opportunity. If you are considering such an arrangement for your SMSF please contact the partner you normally deal with at Macquarie Partners.
Research and Development
Companies that incur expenditure on R&D may claim a number of tax concessions. These include an accelerated rate of deduction (generally 125%), subject to a $20,000 threshold, for wages, salaries, other labour costs and expenditure incurred directly on R&D activities and for certain payments to approved outside bodies.
If the company has a net loss for the year a refundable tax offset equivalent to the value of the R&D deduction is available for small companies.
Taxpayers eligible for R&D concessions
The R&D tax concessions may only be claimed by eligible companies and specified types of partnerships. Individuals and trusts cannot claim the concessions.
Research and Development activities
There are two categories of research and development activities:
• core activities, ie systematic, investigative and experimental activities that involve innovation or high levels of technical risk and are carried on for the purpose of: (a) acquiring new knowledge, regardless of whether it will have a specific practical; or (b) creating new or improved materials, products, devices, processes or services.
• supporting activities, ie other activities carried on for a purpose directly related to the carrying on of core activities.
Ineligible activities
The general rule is that once the product, process or approach is substantially set and the primary objective is to develop markets, carry out pre-production planning or get production or control systems working smoothly, then the work no longer qualifies.
If you consider your business may be eligible for R&D concessions please contact the Partner you usually deal with at Macquarie Partners to discuss.
Features of Insolvent Situations
At all times businesses must be aware of its solvency. Additionally once a year directors of incorporated entities are required to sign a declaration of solvency. So what exactly is “solvency”?
Section 9 of the Corporations Law provided "insolvent" has the meaning given by s.95A(2) of the Law which stated a person who is not solvent is insolvent. In turn, s.95A(1) of the Law provided a person is solvent if, and only if, the person is able to pay all the person's debts, as and when they become due and payable.
To provide a little bit more of a guide to solvency consider the features of insolvent situations as stated in ASIC v Plymin, Elliott & Harrison [2003] VSC 123 (5 May 2003).
The 14 features outlined were:
1. Continuing losses.
2. Liquidity ratios below 1.
3. Overdue Commonwealth and State taxes.
4. Poor relationship with present Bank, including inability to borrow further funds.
5. No access to alternative finance.
6. Inability to raise further equity capital.
7. Suppliers placing [company] on COD, or otherwise demanding special payments before resuming supply.
8. Creditors unpaid outside trading terms.
9. Issuing of post-dated cheques.
10. Dishonored cheques.
11. Special arrangements with selected creditors.
12. Solicitors' letters, summons[es], judgments or warrants issued against the company.
13. Payments to creditors of rounded sums which are not reconcilable to specific invoices.
14. Inability to produce timely and accurate financial information to display the company's trading performance and financial position, and make reliable forecasts.
If you wish to discuss solvency issues further please contact us.
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ATO Key Dates
Monday 21 April
• March 2008 monthly activity statement – due date for lodgment and payment – self assessed deferral is available.
• Quarter 3 PAYG instalment activity statement for head companies of consolidated groups – die date for lodgment and payment.
Monday 28 April
• Quarter 3 instalment notice (form R, S and T) – due date for payment and lodgment. Lodgment only required if verifying the instalment amount.
• Superannuation guarantee contribution to be made to the fund by this date
- Employers who do not pay minimum superannuation contributions for quarter 3 by this date must pay the superannuation guarantee charge and lodge a Superannuation guarantee charge statement quarterly with is by 28 May 2008
- The superannuation guarantee charge is not tax deductible.
Wednesday 30 April
• Last date to report lost member information for period 1 July – 31 December 2007 to us.
• Last date to report and pay unclaimed super for period 1 July – 31 December 2007 to us.
Monday 12 May
• Quarter 3 activity statement – due date for lodgment and payment if lodging via paper or ECI – self-assessed deferral is available.
Thursday 15 May
• Due date for all 2007 income tax returns not required earlier and not eligible for the 3 or 5 June 2008 lodgment date concessions – due date for lodgment
- Payment (where required) for company and superannuation funds is also due
- Payment for individuals and trusts in this category us due as per notice of assessment.
• Superannuation contributions surcharge and termination payments surcharge assessments issued. This is the final automated processing run.
• Due date for superannuation funds income tax return for tax agents clients not allocated to other categories (refer to 31 October, 15 January, 28 February, 31 March)
- We will issue letters to funds advising of their lodgment date approximately eight weeks prior.
• Self-managed superannuation funds (SMSF) – the regulatory return and the member contributions statement MCS form must also be lodged with income tax returns lodged on this date.
• The supervisory levy for a regulated SMSF is due and payable on lodgment of the fund income tax and regulatory return. The ATO will send a Supervisory Levy Payment Advice or the fund can generate its own advice online.
• The audit report for SMSFs must be completed by the day before the income tax and regulatory return is due.
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