If your business is turning over more than $2 million and you need a new server, then you need to act quickly before it is too late to determine what to buy.
Implementing new server infrastructure is a costly exercise, but if you purchase the asset before 30 June, you are eligible for a whopping 30% tax break.If you have a 90 day analysis cycle it may already be too late to do the analysis and get the expenditure approved.
Don't be complacent about this; if you are planning to spend over $10,000 on your server asset you need to make sure you have the solution properly designed. You need to consider storage requirements and processing power as well as software and operating system requirements.
It is also a good time to consider server consolidation through virtualisation while the larger servers meet the $10,000 asset cost requirements for the tax break.Distributors and resellers alike have reduced staff in the well published IT spending downturn, and stockists of large equipment have reduced stock to improve cashflow.
Clearly, trying to place an order at the last minute to have your equipment installed before 30 June is not a good strategy. Sure you can install it next year, but why wait for the refund for an additional 12 months if you know you need the infrastructure now.
Many firms, mine included, are running discount schemes on server hardware to attract much needed services work and to attract new clients, so there has never been a better time for making infrastructure purchases.Be warned that large purchases of desktops and laptops, while great for sub-$2 million turnover companies, are probably not going to get you the discount you are looking for.
According to Paul Wright of Mathews Steer Chartered Accountants, "while there is a lack of clarity regarding the Government's proposals at this stage, the understanding is that the tax concession is per asset, rather than a general aggregation of assets".
He also states that: "It should also be reiterated that as the legislation still hasn't been passed, and the Senate are apparently not sitting until the budget hearing, we have to continue to suggest caution in promoting the tax concession in case the Senate take an alternative view."It has been suggested to me that the Government is seeking legislation by press release rather than due process. So we are all hoping it goes through.
In Wright's words: "The extended delay between the announcement of the proposed concession, and its passing/confirmation, is not proving helpful and impeding the whole purpose of the initiative."One would think that in these pressing times with such big spending and tax cut decisions underway, there could be a special meeting of the Senate to finalise details and let business get on with plans - before it is too late to grab the tax concessions in this period. With cashflow causing issues for so many businesses, waiting 12 months for the refund does not sit well.
Wright also shares that leasing financiers are worried about the delay as they face being inundated with leasing applications just before 30 June. The reality is some applicants may miss out, not just because of the volume of applications, but because credit assessments are generally taking longer. There is therefore a lot to be said for clients gaining finance pre-approvals now, so that the finance is ready, should the legislation be passed.
To gain a pre-approval however, the financier needs to know the details of the asset being purchased, and therefore that planning still needs to be made now.This reinforces my statement about planning.
Now is the time to do the planning and design work to be ready to make the large purchasing decisions as soon as the legislation is passed mid-May, leaving just six weeks for supply and installation. So you will want to include your suppliers in the planning, won't you?
David Markus is the founder of Melbourne's IT services company Combo. His focus is on big picture thinking to create value in IT systems for the SME sector.
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