Almost a year after the 2022-23 Federal Budget announcement, the 120% tax deduction for expenditure by small and medium businesses (SME) on technology, or skills and training for their staff, is finally law. But there are a few complexities in the timing – to utilise the technology investment boost, you had to of purchased the technology and when it comes to acquiring eligible assets, installed it ready for use by 30 June 2023; that’s just seven days from the date the legislation passed Parliament.

So, who is it for?

The 120% skills and training, and technology boosts are available to small business entities (individual sole traders, partnership, company or trading trust) with an aggregated annual turnover of less than $50 million. Aggregated turnover is the turnover of your business and that of your affiliates and connected entities.

The Technology Investment Boost

The Technology Investment Boost provides SMEs with a bonus deduction for expenses and depreciating assets for digital operations or digitising from 7:30pm (AEST) on 29 March 2022 until 30 June 2023.

For depreciating assets, like computer hardware, there is an extra step. The technology needs to have been purchased and installed ready for use. For example, if you ordered 10 computers, you need to have received the computers and had them set up ready to use by at least 30 June 2023. Ordering them on 29 June won’t be enough to claim the boost if you did not receive them.

The types of expenses that might be eligible for the technology boost include:

  • Digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;
  • Digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
  • E-commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; or
  • Cyber security – cyber security systems, backup management and monitoring services.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.

What’s not covered?

There are a few costs that the technology boost won’t cover such as costs relating to employing staff, raising capital, construction of business premises, and the cost of goods and services the business sells. The boost will not apply to:

  • Assets that you purchased but then sold within the relevant period (e.g., on or prior to 30 June 2023).
  • 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, that is, training staff on software or technology won’t qualify.
  • Trading stock or the cost of trading stock.

The boost is claimed in your tax return with the extra 20% sitting on top your normal claim. That is, however the way the expense or asset is claimed (immediately or over time), the bonus 20% applies in the same way.

The Skills and Training Boost

The Skills and Training Boost gives you a 120% tax deduction for external training courses provided to employees. The aim of this boost is to help SMEs grow their workforce, including taking on less-skilled employees and upskilling them using external training to develop their skills and enhance their productivity.

The rules

  • Registration for the training course had to be from 7:30pm (AEST) on 29 March 2022 until 30 June 2024.
  • If an employee is part the way through an eligible training course, enrolments in courses or classes after 29 March 2022 are eligible, not before.
  • The training needs to be deductible to your business under ordinary rules. That is, the training is related to how the business earns its income.
  • A registered training provider needs to charge your business (either directly or indirectly) for the training.
  • The training must be for employees of your business and delivered in-person in Australia or online.
  • The training provider cannot be your business or an associate of your business.

Not all courses provided by training companies will qualify for the boost; only those charged by registered training providers within their registration. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Qualifying training providers will be registered by

  • Tertiary Education Quality and Standards Agency
  • Australian Skills Quality Authority (ASQA)
  • Victorian Registration and Qualifications Authority
  • Training Accreditation Council of Western Australia

While some training you might want to have engaged might not be delivered by registered training organisations, there is still a lot out there, particularly the short-courses offered by universities, or the flexible courses designed for upskilling rather than as a degree qualification. If you have recently completed performance reviews for staff and training is part of their development pathway, it might be worth exploring.