14 minute read
Business, Finance & Accounting
From CB radios to cellular antennas: how Benelec plans to keep its edge
When systems analyst and programmer Marco Benchoam and his (ex) wife Cely started Benelec in 1978, they cashed in on the boom of CB radios by importing and distributing the first 23CH 27MHz CB’s and related accessories. Marco’s son David, an electrical engineer and now General Manager, and his other son Roger, now the Technical Director, then joined the company around 1986 and 1992 respectively. Again following demand, the family turned to antennas, selling products made by a local manufacturer, who they bought out in order to cut costs and manufacture their own.
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Now, Benelec’s core business is in LMR (Land Mobile Radio) and Cellular Antennas, which they also make for the
Australian and US markets. Alongside the antennas, the Botany-based company also specialises in high-end digital radios and accessories. One of their biggest customers is Fire and Rescue NSW, for whom they’ve developed a DRAI dual radio audio solution, a hardy two-way digital radio system that allows the radio installed in the cabin of the fire pumper truck to be used remotely at the rear of the truck, where all the pump controls are.
This Benelec innovation, means in operational situations the pump control fire fighter is able to effectively communicate between the Incident fire fighters and the control rooms managing the local operations. The new generation IP version of this system is now being developed.
Now a three-generation family business, at least one of David’s sons Aaron has put on the Benelec uniform as well.
R&D key to keeping ahead
Over the years, as bandwidths have gotten wider and technology more sophisticated, Benelec’s in-house R&D team has had to constantly redesign their antennas to meet market needs. And it’s paid off. The company says the current performance, bandwidth and design of their products mean they’re superior to most other antennas on the market in either the US or Australia. And they’re all-Australian made. But while Benelec does its own laser and TIG welding in-house, the laser cutting of the stainless steel for the antennas has always been outsourced to another local manufacturer. That’s about to change.
Manufacturing relationships: why Benelec went to St.George Bank
Just as families are fundamentally about relationships, when it comes to choosing a bank to do business with, it’s no different. That’s why Benelec chose St.George and their Relationship Director, Industry Banking NSW, Adam Dowling. “It’s completely about the relationship. The bank manager you have really is like a partner in the business,” says General Manager David Benchoam. “He even gets a share of the profits!” laughs father Marco, the Managing Director. David Benchoam has known Dowling for over 10 years and says St.George, with its specialist manufacturing and wholesale industry team, understands the needs of SMEs like theirs. “Adam just gets what’s involved when we explain things to him,” says Marco Benchoam. Late last year, the antenna and radio specialists went to St.George with a proposal to finance the growth of their in-house manufacturing capabilities. The plan was two-fold: buy their own laser cutting facility so that they can bring all the laser cutting of antennas into their facility, and upgrade their electro-polish business. They’re now preparing to get a new nitrogen laser cutting facility for sheet (up to 16mm stainless steel) and tube (9.5 - 250mm diameter). The nitrogen is generated from the air, dispensing with the need to buy tanks of nitrogen gas. Backup air compressors can be used should there be an issue with the nitrogen plant. Doing the laser cutting in-house is a “big deal … in fact a game changer”,
say the Benchoams. And the plan is for Benelec to tap into the significant growth in the various antenna markets they service. New funding also went towards an upgrade of Electropolish Pty Ltd, the family’s side business in stainless steel electro-polishing. With the money, the company has just installed a new six metre L-shaped polishing tank at its Botany site, along with the infrastructure required for the electricity and chemical baths.
The new polishing tank means the company can offer the polishing service on a bigger variety of fabricated stainless steel products, catering for up to 6m in length. As St.George’s Adam Dowling puts it, “We try to understand how manufacturers think, which is about new machines that expand the business now, and save costs tomorrow. “The manufacturing side that St.George specialises in adds value, because all the banks offer the same products and services, really.” “But it’s the way you offer it,” says Marco Benchoam. “And the level of understanding,” points out David Benchoam. “You can talk to two or three bank managers and have a totally different experience with them all.”
Benchoam family - L-R: Aaron, Marco and David Benchoam David Benchoam showing St George’s Adam Dowling the new polishing tank
St.George’s Adam Dowling, David & Marco & Aaron Benchoam with the NSW Fire & Rescue DRAI system.
Benelec Pty Ltd
benelec.com.au
St.George Bank
stgeorge.com.au/ manufacturing
Alex Zinzopoulos is a Tax and R&D Advisor at William Buck, Accountants and Advisors
The R&D tax incentive helping companies to experiment and innovate
Administered jointly by the Australian Tax Office (ATO) and AusIndustry, the Research & Development (R&D) Tax Incentive is Australia’s largest industry incentive scheme, assisting nearly 10,000 companies per year. However, it remains underutilised, mainly due to a lack of knowledge around eligibility requirements and implementation. We caught up with Alex Zinzopoulos, R&D advisor at William Buck, to find how manufacturing businesses can make use of the scheme.
Industry Update: Let’s start with the basics – what is the R&D Tax Incentive and how much can businesses claim?
Alex Zinzopoulos: The R&D Tax Incentive is designed to support Australian businesses undertaking experimental activities, with the aim of helping those businesses succeed. At a high level, the incentive is in the form of a tax offset that’s applied through the company’s tax return.
For businesses with a turnover of less than $20 million a year, the tax offset is generally 43.5% of eligible R&D expenditure. Further, the offset is refundable, meaning that once the offset has been applied to any tax liability the company has, any excess is paid to the company in cash.
The offset is claimed through the company’s tax return. An R&D application must firstly be lodged with AusIndustry within 10 months of the end of the company’s income year, so for companies with a 30 June yearend, the due date is 30 April of the following year. AusIndustry usually takes a couple of weeks to process the application and (if successful) provide a registration number. That registration number goes into the company’s tax return along with the calculation of the R&D expenditure, after which the ATO processes the return and releases any refund.
IU: Do you think manufacturing businesses are taking full advantage of the scheme?
Alex: Advanced manufacturing businesses tend to be conducting activities that are pretty innovative and complex, which are the types of activities the R&D Tax Incentive is designed to support, yet we are not seeing as many manufacturing businesses apply for the incentive as we would expect.
If you’re in the advanced manufacturing industry, you should always ask yourself: have I considered whether I’m eligible for the R&D Tax Incentive? If not, why not?
IU: How do businesses know if they qualify?
Alex: Firstly, the business must be operated through an Australian company – trusts, partnerships and sole traders don’t qualify.
Secondly, the company must be conducting at least one “core R&D activity” during the income year, which has three key components:
1. New knowledge: The activity is being conducted for the purpose of generating a new or improved product, device, process or service – something that’s not available on the market. 2. Technical uncertainty: Prior to undertaking the activity there is a risk that the activity won’t succeed. 3. Experimentation: The only way to resolve the technical uncertainty is to apply a systematic progression of work based on the principles of established science.
If a company is conducting at least one core R&D activity, supporting R&D activities can also be claimed. As the name suggests, supporting activities are there to support the core R&D activities, but do not actually form a part of the experimentation itself. These may be things like project management, collection of data, and setting up of machinery and line equipment.
IU: Can Australian businesses with operations overseas qualify?
Alex: The aim of the incentive is to support Australian-based businesses, so there are very limited circumstances where overseas expenditure will be eligible. There needs to be a very solid reason why those activities are being conducted overseas. I tell people that an overseas R&D application is like a normal R&D application
but on steroids! There’s a lot of time required to apply for an overseas application and many hoops to jump through, so the benefit needs to be worth it.
Industry Update: How far in advance should businesses plan for claiming the incentive?
Alex: Planning is crucial.
Although the application and tax return are lodged after 30 June, we always recommend businesses don’t wait until 30 June to begin a claim. Ideally, it’s something that should be considered throughout the income year. It’s important to have the proper documentation in place to show that you’ve been conducting the R&D activities throughout the year should the ATO or AusIndustry conduct a review.
Where an R&D claim is denied it’s often not to do with the eligibility of the claim, but rather the lack of contemporaneous documentation evidencing that R&D activities were in fact conducted during the income year.
IU: What documentation is required?
Alex: For manufacturing businesses, the largest R&D expenditure tends to be employee costs or machinery costs. You may find that your lead engineering team spends a significant portion of their time on core R&D activities. Documenting and claiming employee costs is done through timesheets, which can be a very foreign concept to people other than accountants and lawyers!
Regarding machinery, there’s the depreciation. The depreciation rates being used by the company can have a substantial impact on the amount of R&D it can claim. Documentation is required to tie the core R&D activity back to the machinery and outline why that particular machine is needed to conduct the activity.
Other types of documentation that AusIndustry in particular would expect to see include experimental reports, testing and analysis records, and progress reports.
IU: What other advice do you have for companies undertaking a claim?
Alex: Never view your R&D in isolation. There’s a common misconception that R&D sits outside of tax. However, at the end of the day, the R&D Tax Incentive is just that, a tax incentive. It’s part of the company’s overall tax profile.
There are various flow-on effects of the R&D Tax Incentive to other tax provisions, including the franking account, depreciation, commercial debt forgiveness, government grants and recoupments. And if there’s an ATO review, they won’t just ask questions around the R&D, they’ll extend it to other areas of the company’s tax return as well.
These are all areas a boutique R&D advisor might not be across. We always recommend that holistic tax and R&D advice is provided to ensure your bases are covered.
Alex Zinzopoulos is a Tax and R&D Advisor at William Buck, Accountants and Advisors. William Buck’s R&D team combines industry experience across manufacturing, engineering and technology with technical tax expertise to provide a holistic view of their client’s claims and businesses. You can connect with Alex Zinzopoulos at linkedin.com/in/ alex-zinzopoulos-37937691.
William Buck williambuck.com
Australia’s first synthetic turf recycling plant to be fast-tracked
Tuff Group Holdings has won $500,000 grant funding to build Australia’s first synthetic turf recycling facility.
William Buck was engaged to prepare the grant application and Tuff Holdings was allocated the maximum amount for a single grant from Sustainability Victoria’s fund to support recycling businesses.
The grant means Tuff Group, Australia’s largest supplier and installer of synthetic turf, can fasttrack plans to build a synthetic turf recycling facility in regional Victoria. The facility is projected to recover 98% of raw materials from used artificial turf for recycling and redistribution—a significant reduction of burdens on metropolitan landfill sites.
The ability to recycle is becoming increasingly important because of growing demand for synthetic grass at residential as well as commercial sites.
The sustainable processing plant will create jobs and a new service offering businesses a low-cost, ethical alternative to virgin materials.
The grant is a game-changer for Tuff Group and contributes to Australia’s goal to be an environmentally conscious nation. This recycling facility is expected to bolster the growth of and social perception of the synthetic turf industry as the project influences both industry and individual behavioural change towards a more circular economy.
William Buck williambuck.com
Business feels rates bite
By Colin Cooper, Director, Australiawide Finance
Adetermination to control inflation with rising interest rates is changing the financial outlook, says Colin Cooper, director of Australiawide Finance.
There are strong signals that higher interest rates are biting. A sharp downturn in asset purchase finance and increased enquiry for non-specific business finance likely reflects slowed business conditions and the higher costs of doing business.
In its recent Quarterly Commercial Insights report, credit bureau Equifax noted that asset finance (vehicles and equipment) fell 9.1% in the second calendar quarter of 2022 compared to the same period in 2021. Business loan (non-specific funding) applications rose by 2% in the same measure.
Some of the change in asset finance may be reflected by supply chain issues, with a long and not yet reconciled build-up of unfulfilled orders. Business finance needs are more likely to be in response to slowed conditions caused by a lack of labour and pushing results all the way through to extended payment times.
The strongest evidence of the slowing economy is the recent reversal of the emphasis on rate rises – from sharp, quick and regular increases at little notice, to a strong willingness for lenders to compete hard and discount rates for quality business. Most banking contacts report that rate markets are settling and loan application turnaround times have reduced sharply.
Temporary full expensing
What does ‘temporary full expensing’ mean? In simple terms, it potentially means a very large tax deduction or a refund!
Business assets, installed and ready for use by 30 June 2023 can be written off in full (instead of depreciating over a number of years). There is no limit to the number of assets, no ceiling to the amount of any purchase and it is available to a business with an aggregated turnover up to $5 billion.
A temporary full expense writeoff can cause a tax loss for the year which may result in a refund of taxes paid in previous years.
These arrangements, which came about as the result of pandemic provisions to stimulate the economy, will end on 30 June 2023 and we are unlikely to ever see them again
Interest rates and credit approval
We continue to see new entrants to asset lending, with access to wholesale funds and the scope to lend across a wide range of industries.
Vehicles and wheeled goods typically attract the best rates but we also see manufacturing and warehouse equipment financed at similar rates by lenders who have the confidence to use industry expertise to fill niches.
Financiers are moving fast toward automated application assessment criteria, which results in quick responses but can have unintended consequences.
Because the lending market is fragmented into niches, it’s imperative to go to the right lender with the right information - it’s now less likely your application will be viewed by a human.
The best method to obtain the best finance is to consult an industry expert. You may be surprised at how quickly and economically you can finance equipment, preserving cashflow and helping grow your business.
Use our industry expertise and contact us if you seek access to vehicle and equipment lenders with great rates and quick approval times.
Colin Cooper, Director of Australiawide Finance
australiawide Finance
austwidefinance.com.au
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