A few months ago we wrote about the 2022-23 Budget and the proposed 120% tax deduction for expenditure by small and medium businesses on technology, or skills and training for their staff. This proposal has now been adopted by the current Government and details released in recent exposure draft by Treasury.
Two investment ‘boosts’ will be available to small and medium businesses with an aggregated annual turnover of less than $50 million:
- Skills & Training Boost
- Technology Investment Boost
Skills & Training
The Skills and Training Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2024. The business, however, will not be able to start claiming the bonus deduction until the 2023 tax return. That is, for expenditure incurred between 29 March 2022 and 30 June 2022, the additional 20% ‘boost’ deduction will not be claimable until the 2022-23 tax return (assuming the announced start dates are maintained if and when the legislation passes Parliament).
Technology & Investment
The Technology Investment Boost is intended to apply to expenditure from 7.30pm ACT time on Budget night, 29 March 2022 until 30 June 2023. As with the Skills and Training Boost, the additional 20% deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the 2023 tax return.
The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services.
The boost is capped at $100,000 per income year with a maximum deduction of $20,000.
Eligibility for the Technology & Investment bonus
To be eligible for the Technology & Investment bonus deduction:
- The expenditure must be eligible for deduction (salary and wage costs are excluded for the purpose of these rules)
- The expenditure must have been incurred between 7.30pm (AEST), 29 March 2022 and 30 June 2023
- If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023.
- The expenditure must be wholly or substantially for the entity’s digital operations or digitising its operations.
- Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.
Not included
The bonus deduction is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. The boost will not apply to:
- Assets that are sold while the boost is available
- Capital works costs (for example, improvements to a building used as business premises)
- Financing costs such as interest expenses
- Salary or wage costs
- Training or education costs
- Trading stock or the cost of trading stock
Eligibility for the Skills & Training Boost
The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees.
External training courses will need to be provided to employees in Australia or online, and delivered by training organisations registered in Australia.
To be eligible for the bonus deduction:
- The expenditure must be for training employees, either in-person in Australia, or online
- The expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope (if any) of the provider’s registration
- The registered training provider must not be the small business or an associate of the small business
- The expenditure must be deductible
- Enrolment for the training must be on or after 7.30pm, 29 March 2022.
Not included
Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees. The training boost is not available to:
- Sole traders, partners in a partnership, or independent contractors (who are not employees)
- Associates of the business such as a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person.
For more information get in touch with our team on info@fluxadvisors.com.au
