Five IT tax tips for the Financial Year from Computer Troubleshooters Australia
With the end of the Financial Year 2011/12 fast approaching, it's never to early to start planning and implementing tax related decisions. Computer Troubleshooters Australia provides their own IT tax tips to consider, with advice from your tax advisor.
Prepayment of IT Services
For Small Businesses or Franchises turning over less than $2 million a year can benefit from prepayment services. It is a great way of tax effectively managing your future IT costs and having a complex area of your business effectively outsourced to an expert.
A prepayment is not apportioned but allowed in full as a deduction in the year in which it is incurred if all services in respect of the prepayment are provided with 13 months of incurring the expenditure.
Your Computer Troubleshooter can provide prepayment of IT services using either a Managed Services Contract or a Block Time Services Agreement.
- A Managed services Contract has a defined service level and a monthly management component. This allows your network to be proactively managed and serviced like an outsourced IT department.
- A Block Time Services Agreement is an agreement to provide a specific number of hours of services at an agreed rate. This is a responsive contract where you use your Computer Troubleshooter as your service provider on a pay for service basis over the year. Generally this must be expended within the 12 month period.
There is a major change in the legislation for Small Business (turnover under $2M) relating to the depreciation treatment of assets that will have a major impact on investment decisions prior to June 30.
Small Businesses or franchises using the simplified depreciation rules, in many cases, can claim an immediate deduction for a depreciating IT asset costing less than $6,500.
As such, the increase of the threshold to $6,500 from $1,000 presents significant benefits for small businesses in terms of compliance and cash flow.
So while IT equipment may have an effective life of 4 to 3 years, the deduction for equipment for up to $6,500, from July 2012, can be taken in the year of purchase. If you purchased a large piece of IT equipment in June 2012 it would be depreciated over 4 years, while if you held over the purchase it would be fully deductible for the 2012/13 tax year.
For a business with a turnover above $2M, the depreciation rules remain the same with varying rates for asset types depending on the expected asset life.
This increased change in depreciation rules for Small Business means if you upgrade your IT equipment sooner you could be experiencing the benefits of the latest technology tax effectively with a lower downtime risk and better running costs.
Home Computer Services
If you have used Computer Troubleshooters for servicing a computer that has been used for deriving income or managing tax affairs, a proportion of the amount may be claimed as a deduction for tax purposes. IT costs such as internet access, printer consumables, depreciation, and computer security subscriptions may be proportionally deductible in the same circumstance.
Like all personal tax deductions you would need to provide proof of the expense and verify the proportion of the cost that is deductible.
Get Tax Advice and Make a Plan
Be proactive and plan your tax outcomes in advance. Take advantage of tax incentives and ensure your IT is up to speed.
Talk to your tax advisor and your local Computer Troubleshooters to find a tax effective IT plan for your circumstances.
Audit you Systems
At Computer Troubleshooters we always prefer to manage your IT systems rather than your IT problems. However, ask yourself these questions before you decide if you need an expert IT audit.
- Are you IT systems older than 3 years?
- Has your network been built gradually over time?
- Do you think there is a better way to operate?
- Do you have a daily backup routine?
- Do you know what will happen to your business if your hard drive were to fail?
- Do you know how long your business take to recover from a natural disaster that lost your system and network?