Research and Development – Registration is required by 30 April 2014. An extra tax rebate is available for a company that incurred more than $20,000 on Research and Development activities for the year ended 30 June 2013. If you wish to claim the rebate, you must register with AusIndustry prior to the 30 April 2014 or the date of lodgement of the company's income tax return, whichever is the earlier. If you are conducting ongoing Research and Development activities, you still have to register by the 30 April each year.
The Research and Development Tax Rebate for companies with turnovers under $20M is 45% of the eligible research and development expenditure which can include salaries of team members who have been legitimately engaged in research and development project activities. If the company is trading at a loss, you can be paid the Research and Development Tax Rebate as a cash amount within 30 days of lodgement of the company's income tax return.
If you would like assistance, relative to completing the Research and Development Application Form and lodgement with AusIndustry, please do not hesitate to contact us.
PPSR – Now Fully Operational
The Personal Property Securities Act (PPSA) became fully operational from the 31st January 2014. This means that the Personal Property Securities Register (PPSR) is now fully operational.
The PPSA allows a 'security interest' in personal property to be registered and searched by anyone at any time. 'Personal property' applies to everything, except land and buildings. Whilst there is no compulsion to register any asset with the PPSR, if you don't register assets to which the legislation has deemed a requirement, you could end up losing those assets (even though you paid for those assets) to someone else who has a superior claim to you, because they have registered in accordance with the PPSA. That business will then be lawfully able to sell the asset for which you have paid and utilise proceeds, as contribution towards payments to secured creditors.
Virtually every business will be affected by this legislation. If you have not seen your commercial solicitor for advice on your 'Terms of Trade' and the 'Retention of Title' clauses ('Romalpa Clauses') included within your tax invoices, there is a strong possibility that you are not complying with the PPSA legislation. As your accountants, we are able to assist you in implementing appropriate systems for the management of transactions that should be considered for registering the security interests on the PPSR.
There have been major legal decisions, which have cost people, who thought they owned the assets but had not registered on the PPSR during the two-year transitional period. To their utmost dismay, they have found that the law didn't recognise their ownership. In the case of WOW Sight & Sound, the business went into financial difficulties and many of the suppliers, who had supplied stock and consignment stock to WOW Sight & Sound stores, did not register their interest in the stock they supplied with the Personal Property Securities Register. The liquidator was able to register the stock items that were in the premises at the time of their appointment, thus the 'owners' of the stock did not have a priority. As a result, the suppliers lost a large amount of money.
In the QES case, QES placed plant and equipment on someone else's property, which went into liquidation. QES did not register their security interest on the PPSR, and the liquidator was able to claim that plant and equipment, and sell it for the benefit of the secured creditor.
In the Kentor Minerals case, a business supplied a tank worth $300,000 to Kentor Minerals, which then went into liquidation. The owner of the tank did not register their security interest on the PPSR, and they were unable to claim a priority on the tank. The liquidator was able to sell the tank for the benefit of the secured creditor.
This legislation is very important; if you have any questions as to how the legislation operations might affect your business, please do not hesitate to contact us.
Some of the Businesses Affected by PPSA
The Personal Property Securities Act (PPSA) will affect a wide range of businesses. Some of the key issues businesses which have transaction that could be registered on the PPSR include:
• retention of title clauses ('Romalpa Clause');
• Terms of Trade – both of these documents should be drafted by a commercial solicitor, who will ensure they comply with the PPSA;
• businesses operating in leased premises should seek legal advice on registering a security interest over plant, equipment, furniture, stock etc., that is situated on the leased premises; and
• another potential problem is preferential payments that may have been paid to your business. To protect yourself, you will need to seek legal advice on your Terms of Trade documents and the lodgement of a security interest on the PPSR.
Some of the businesses, which will be affected by the PPSA, include:
• restaurants, shops, offices, warehouses that are being leased from their owners;
• retail shop – retention of title clauses for credit sales;
• trades and sub-contractors – registration of security interests on tools, equipment, vehicle and machinery left on a third party workplace - gaining access to leased premises to retrieve tools, equipment, vehicles etc;
• risk of preferential payment claim by a liquidator, relative to leasing of furniture, fittings, equipment etc., that has been supplied to a third party e.g. a builder;
• wholesaler supplier – retention of title clause and registration of security interests for stock sold and not yet paid for and consignment stock;
• horses and other livestock that have been leased to a third party - registration of your security interest;
• farmers – crops – registration of a security interest in farm produce stored on someone else's premises; and
• equipment renters – registration of security interest.
In addition, other businesses will need to consider the PPSA legislation include:
• motor vehicle dealers;
• ingredient suppliers;
• water craft including boat owners;
• artists for paintings and other works of art;
• livestock on agistment;
• equipment such as harvesting equipment stored at someone else's property;
• share farmers;
• automotive spare parts suppliers;
• second hand motor vehicle dealers; and
• prawn brokers;
• second hand dealers.
The type of transactions potentially effected by PPSA include:
• businesses buying assets – check the PPSR to see if there is any encumbrances on the asset you are proposing to purchase;
• service entity arrangements
• leasing goods – the legislation has introduced the term PPS Lease;
• leaving property at someone else's premises; and
• supplying goods on credit;
• dealing with your business' intellectual property.
• consignment stock;
The PPSA represents a very large change in commercial law, with some people claiming it is the biggest change in the last 200 years. If you have any concerns on your business transactions and how they might relate to the PPSA legislation, our recommendation is that you consult your commercial solicitor for advice on Retention of Title clauses and Terms and Conditions of Trade.
Please contact us for a discussion relative to the implementation of an appropriate system, for the PPSR, for your business.
Businesses Entities – Unit Trusts
A 'unit trust' is different to a discretionary trust (refer Issue 98 – December 2013). Many small business operators use unit trusts for their business operations. In a unit trust, a beneficiary has a fixed interest with a designated number of units similar to a partnership. The beneficiary is called a 'unit holder', and is entitled to a distribution of income, in accordance with the percentage of units held in the unit trust. It is not unusual in a unit trust for there to have been a payment made for units allocated. A unit trust is normally used when there is more than one family or group of people involved in a business operation.
The unit trust needs a trustee. A trustee can be a company or, at least, two individuals. The trustee is responsible for all day to day activities of the trust. The activities of the trust are governed by the trust deed. A 'discretionary trust' is maintained by the trustee. This records the name, address and number of units owned by each unit holder.
A unit trust can operate virtually any type of business. In normal circumstances the unit trust does not pay income tax. The trustee must ensure there has been a distribution of the taxable income to the unit holders, in accordance with the percentage they hold in the unit trust. If the trustee does not make a distribution, then the trust has to pay income tax at the penalty rate of 46.5%.
There are special laws relating to unit trust losses and bad debts incurred by a unit trust. An example of a unit trust flow chart –
If you have any questions on any aspect of the operations of a unit trust, please do not hesitate to contact us.