IT Tax Tips - 2011
As the end of the Financial Year 2010/11 approaches we are starting to
think of ways of ensuring our business is tax effective, so now is the time to
start planning and implementing. The recent Federal Budget in May 2011 held few
new advantages for this financial year from an IT perspective however many
options remain. Here are our 5 IT Tax Tips you might consider with advice from
your tax advisor:
1 Prepayment of IT Services
For Small Businesses turning over less than $2 million a year prepayment
of the following years IT services 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 & 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.
Example - A
Small Business decides to contract Computer Troubleshooters for it’s 2011/2012
IT outsourcing contract for $500 a month. The $6,000 contract covering 12
months is signed and paid prior to end of June 2011. The business can claim the
$6,000 deduction in its 2010/11 tax return.
The depreciation rate on IT equipment is quite high due to their low
expected life compared to many other depreciable assets. For depreciating IT assets
over $300, the effective life is 4 years and 3 years for laptop computers.
Small Businesses using the simplified depreciation rules in many cases can
claim an immediate deduction for a depreciating IT asset costing less than
The Federal Budget in May 2010 announced that in the 2012/13 tax year
this instant write off for small business will be increased to $5,000 which
will save on depreciation calculations and improve cash flow.
However in the meantime the existing rules apply, which means while
equipment may last beyond it’s depreciated life you may no longer have
depreciation tax benefits.
So, if you upgraded your IT equipment you could be experiencing the
benefits of the latest technology tax effectively with a lower downtime risk
and better running costs.
Example - A
Small Business has a fully depreciated server which is five years old and
expensive to maintain with a high risk of failure. It replaces the Server with
a new one purchased & installed for $3,000 & depreciates the equipment
on an ongoing basis. Depreciating the $3,000 over the life of the asset moves
some expenses from cash to non-cash and reducing business continuity risk.
3 Education Tax Refund
Federal Government’s education tax rebate for primary and secondary students has
continued for this tax year with the amounts eligible indexed from last year.
tax payers will be able to claim 50% for costs up to $794 for primary school
students (i.e. a rebate of up to $397), and 50% for costs up to $1,588 for
secondary school students (i.e. a rebate of up to $794).
n To be
eligible, the taxpayer must receive Family Tax Benefit (‘FTB’) Part ‘A’ or the child receives certain payments or
allowances such as Youth Allowance, ABSTUDY or Disability Support Pension
and computer running costs (such as internet service provider fees, laptops,
home computers, printers, toner, and stationery) used by students can be
claimed. Home Computer Services are also
eligible. Make sure you keep receipts and tax invoices for inclusion for the
Example – A
family receives Family Tax Benefit Part ‘A” and have 2 children in school one
in primary, the other in secondary. They purchase a $2,000 home computer for
use by the children and pay $60 a month for ADSL. Total spending of $2,720 on
IT for the students is incurred before end of June 2011. In their 2010/11 tax
return they claim $780 for the primary student & $1,558 for the secondary
student. This equates to a rebate of $390 plus $779, so the rebate of $1,169
will be included in their 2010/11 tax return.
4 Home Computer
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 (toner & paper), depreciation, and computer security
subscriptions may be proportionally deductible in the same circumstance.
personal tax deductions you would need to provide proof of the expense and
verify the proportion of the cost that is deductible.
Example - A home
user who uses their home computer for managing their tax & financial
affairs has previously verified with their tax consultant that 30% of the costs
associated with the computer are tax deductible. The home user has used
Computer Troubleshooters during the year and spent $300 in repairing the
computer and has a tax invoice & receipt. The owner can include the $300 in
their computer running expenses & gain a $90 deduction for the costs (30%)
in their 2010/11 tax return.
5 Get Tax Advice & Make a Plan
Often we wait until the end of the financial year to think about tax.
This year why not be proactive and plan your tax outcomes in advance. Why not
take advantage of tax incentives and ensure your IT is up to speed
Talk to your tax advisor and your local Computer Troubleshoooters to
find a tax effective IT plan for your circumstances.
Example - A Small
Business turning over less than $2 million a year decides to develop an IT plan,
with its tax advisor they determine to bring forward a planned $10,000 total
network upgrade and appoint Computer Troubleshooters as their outsourced IT
department for next year for $6,000. The business is able to reduce the 2010/11
tax liability by $6,000 by prepaying the managed services contract for 2011/12
and gaining depreciation benefits from the date of installation. Giving the
business a financial boost for the 2010/11 year, but also having upgraded the
IT infrastructure and outsourced the IT management they have reduced business
continuity uncertainty and improved efficiency.
For more information talk to your local Computer Troubleshooters - your
Trusted IT Advisor
All advice contained in this communication is of a general nature and
should not be relied on as a reliable source for Tax advice. The IT Tax Tips
contained in this document were regarded as correct at the time of writing,
changes to legislation or proposed legislation may alter these Tips. We
recommend you contact the Australia Tax Office, your professional advisor or a registered
Tax Agent for advice in respect of your personal or business situation.
At Computer Troubleshooters we always prefer to manage your IT systems
rather than your IT problems.
Are you worried about future problems?
Then get us in to do an Audit so we can review your current situation
and recommend courses of action.
We offer Audits in 3 areas – System,
Security, & Disaster Recovery.
Here are a few questions you should ask yourself before you decide if
you need an expert IT Audit
Are your IT systems older than 3 years?
Has your network been built gradually over time?
Do you think there is a better way to operate?
& Network Audit
- Review your current
hardware & licencing
- Report on system
- Recommend actions to
manage your network to protect & improve performance
Do you wonder if your Network is secure?
Do you have multiple access points to your system?
Have you experienced any system slowdowns or outages?
- Scan your network for
current incursions or issues
- Pinpoint any exposure
or risk form hackers, viruses, spyware, spam and even employee sabotage
- Recommend alternatives
to improve your network security
Do you have a daily backup routine?
Do you know what will happen to your business if your hard drive were to
Do you know how long your business would take to recover from a disaster
that affected your IT systems & network?
& Disaster Recovery Audit
- Review your current
backup routine and test your data can be actually be recovered?
- Review your disaster
recovery procedures to ensure business continuity?
- Recommend improved
methodology, technology, or routines to enhance business disaster
About Computer Troubleshooters
in 1997, Computer Troubleshooters unique business model stresses friendly,
personal service from a network of independent, local franchisees. With over 480 locations worldwide, Computer
Troubleshooters is the world’s largest computer service franchise.
Troubleshooters is ’s
largest IT service franchise with over 90 franchises in all states of .
Computer Troubleshooters specialize in the setup, maintenance, repair and service
of small Business and home office IT networks.
Troubleshooters - Liverpool
All advice contained in
this communication is of a general nature and should not be relied on as a
reliable source for Tax advice. The IT Tax Tips contained in this document were
regarded as correct at the time of writing, changes to legislation or proposed
legislation may alter these Tips. We recommend you contact the Australia Tax
Office, your professional advisor or a registered Tax Agent for advice in
respect of your personal or business situation.