Veritech : Network Technology + Innovation

The tax break can apply to any eligible asset, however analysts often refer to a computer as an example.  It could apply to any other technology asset used in a business.  There are specific conditions related to eligibility, which are certainly best discussed with your accountant.  It is also worth noting that whilst the legislation is proposed, it is still to be passed at the time of writing. 

In summary the Small Business and General Business Tax Break will mean that a small business (less than $2M turnover), can buy and install new computer equipment to receive the tax break, as long as it costs more than $1000, is purchased before the end of June 2009 and installed before 30 June 2010.  Such businesses can claim an additional 30% deduction in its 2008-09 tax return (eg. $600 deduction for a $2000 computer).  If you wait to install until after the deadline, but before December 2010, the tax break is only 10%.

Larger businesses ( >$2M) are entitled to the same deduction percentage rates for the same defined purchase and installation periods however this only applies to eligible assets costing greater than $10,000.

This deduction is on top of the usual capital allowance deduction claimable for the asset in the taxpayer’s income tax return.

This is welcome news to businesses as 2008 saw US technology suppliers put their prices up across the board.  So with limited time to buy, and to install, it’s important to make the right decisions.  What should you consider purchasing?

Based on what we’re seeing in the industry now, the following discussions might assist in your decision making process:

Desktop computers: are generally considered to have a 3 year lifespan, but are often stretched to five years operation in businesses.  Have you squeezed all you can out of your PCs?  Newer, faster desktop computers can mean increased productivity, reduced downtime, and more reliable operations to keep your business running smoothly.  If you have slow, or unreliable computers, consider the real impact to your business.  If you do decide to upgrade, make sure you have an extended warranty, preferably to 3 years.

Servers: store your common data, and perform key tasks such as email, database, accounting systems functions.  Servers are generally high cost items, so they are an excellent investment to benefit from this new tax break.  Although it depends on the size of your business, servers less that $5000 can’t seriously be considered as servers!  Look to include the maximum amount of RAM (memory) possible, fast processors (dual or quad core), and I recommend well-known brands only.  Don’t forget to include ample disk subsystems for storage: RAID-1 (mirrored) or RAID-5 (redundant arrays) really do maximise system reliability.  Don’t be afraid to include five or preferably more physical disks in the array.

One common afterthought is for backup systems.  You must never assume that a server will never fail.  Include, from the start, a comprehensive backup system which allows you to recover all of your data in case of disaster.  Bare-metal recovery systems are great, as they allow you to backup your operating system as well – but might be overkill for more cost-sensitive installations.  You can choose backup tapes, external hard drives, CD, DVDs, whatever.  It’s just important to have the system in place, and your staff accustomed to maintaining a strict backup regime.

Network Equipment: switches and routers: are the core of your network.  Every bit of data you process will cross your network at some stage – so the speed, and reliability of your network is critical for optimised operations.  Advances in technology mean that gigabit speed switches are commonplace and quite cheap.  Buy the best that you can as these will last for years in your network: whirring away silently, but aim for devices faster and more reliable than ever before.

Internet Security: is an all-to-common topic in my articles.  It is such an important component of your IT system, but is often overlooked because it operates so transparently.  Well organised networks will have separate systems to handle internet security.  This may be a standalone firewall, internet router, spam filter, web content filter, anti-virus filter, or remote VPN server.  Or, it may all be encompassed in the newer concept all-in-one UTM (Unified Threat Management) devices.

The key point about Internet security is that it is evolving and changing all of the time.  And unfortunately, given the nature of the Internet, is likely to always be an annoyance.  If you have old technologies in place to protect your business from Internet threats, now is an excellent time to replace them.  Current technologies are mature and well tested, and if properly maintained, can provide ongoing protection.

Power Protection: UPS’s or Uninterruptible Power Supplies, are power filters with inbuilt battery packs.  They help protect your equipment from power surges and dropouts.  If you already have UPSs in place, remember that their batteries generally require replacement after two to three years of operation.  You should ensure that all your core equipment is connected through a UPS, this could include: servers, critical PCs, switches and routers, phone systems, fax machines, and so on.

Veritech Corporation provides consulting and technical advice to small, medium and large businesses in the areas of acquisition, design and installation.  However, we do not provide investment or accounting advice, so for financial issues, we recommend you seek advice from your accountant or advisor.

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