Supporting Small Business | Technology Investment Boost and Skills & Training Boost
On 23 November 2022, the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 was introduced in the House of Representatives to implement the Technology investment boost and Skills and training boost, following measures previously announced as part of the 2022-23 Federal Budget to support small business entities.
The Technology Investment Boost and Skills and Training Boost became law on 23 June 2023.
What is it?
Technology investment boost: The technology investment boost allows eligible small businesses to claim a bonus deduction equal to 20% of the eligible costs incurred in relation to business expenditure and depreciating assets to support the businesses’ digital operations capped at $20,000 per income year.
Skills and training boost: The skills and training boost allows eligible small businesses to claim a bonus deduction of 20% on the eligible costs incurred for a broad range of external training provided to their employees.
Who is it for?
The two tax incentives apply to small business entities with an aggregated turnover of less than $50 million.
Eligibility requirements of the expenditures
Technology investment boost
To be eligible for the bonus deductions, the expenditures must be incurred in relation to the businesses’ digital operations and must meet the following criteria:
- the costs must be incurred between 29 March 2022 and 30 June 2023
- the expenditures must be deductible under another taxation law
- if the expenditure relates to a depreciating asset, then the asset must be first used or installed ready for use by 30 June 2023.
Some examples of the expenditures that support the digital operations of the businesses include the following:
- digital enabling items – computer and telecommunications hardware and equipment, software, internet costs and services that form and facilitate the use of computer networks
- digital media and marketing – audio and visual content that can be created, accessible or viewed on digital devices
- e-commerce – supporting digitally ordered or platform-enabled online transactions and portable payment devices, and subscriptions to cloud-based services
- cyber security – cyber security systems and monitoring services.
Certain expenditures such as salary & wages, financing or training costs, and expenses incurred in developing in-house software are not eligible for the bonus deduction.
Under the existing taxation law, small business entities generally deduct a depreciating asset’s cost in one income year or over its effective life. The bonus deduction is equal to 20% of the asset’s cost regardless of the method of deduction that the entity adopts.
Skills and training boost
Expenditure eligible for bonus deductions under this measure will need to satisfy the following criteria.
The expenditure must be:
- incurred between 29 March 2022 and 30 June 2024
- for external training of the employees, either provided in-person in Australia or online (regardless of where the employee is located). This means that in-house or on-the-job training will not qualify for the bonus deduction
- for the purpose of training where the arrangement or enrolment occurs on or after 29 March 2022
- deductible under taxation law, which means the training should be business related
- the small business entity must be charged directly or indirectly for the expenditures by a registered training provider, and the training program must also be within the scope of the provider’s registration.
Practically this would mean that where incidental costs are incurred, they will not qualify for the bonus deduction unless it is charged by the registered training provider.
- the registered training provider must not be the small business entity or an associate of the small business entity.
We note that the incentive only applies to employees. It is disappointing to see that this provision does not therefore apply to training provided to:
- non-employee business owners such as sole traders or partners in the partnership, or
- contractors in a business.
When can the bonus deduction be claimed in the tax returns?
For both tax incentives, there are special rules for the entities to determine when they can claim the bonus deductions in their income tax returns. The timing when the bonus deductions can be claimed will depend on when the expenditures are incurred and the entities’ balancing date.
How we can help
If you would like to discuss further the eligibility requirements or how to claim the bonus deductions, please get in touch with your usual SW advisor.
Rahul Sanghani, Senior Manager
Dalin Teav, Tax Consultant