Major bonus deductions available to small businesses after Senate passes tax breaks

On Wednesday June 21, the Senate voted to approve The Small Business Technology Investment Boost and Small Business Skills and Training Boost, twin policies which offer 20% ‘bonus’ tax breaks to small businesses who choose to invest in their personnel and tech upgrades.

This clears the way for businesses to claim up to $20,000 in bonus deductions.

Can I claim the boosts this tax season?

The bill will need to return to the House of Representatives for final confirmation before being presented for assent into law.

If you would like to claim the small business technology investment or skills and training boost, you can delay lodging your 2023 tax return until the law is enacted.

Alternatively, you could choose to lodge your return and claim your ordinary deduction for the technology investment or skills and training expenditure. Then, when the law is enacted, your accountant can amend your return to claim the 20% bonus deduction.

How does the Technology Investment Boost work?

The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that supports digital adoption, such as portable payment devices, cyber security systems, or subscriptions to a cloud-based service.

This is capped at $100,000 per income year with a maximum deduction of $20,000.

The $20,000 bonus deduction is not paid out as cash but is used to offset against a company’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss.

The cash value of the bonus deduction will depend on whether your company generates a taxable profit or loss during the relevant year and the rate of tax that applies.

What is the eligibility criteria for the Technology Investment Boost?

If you wish to use this deduction, you will need to ensure that:

• The expenditure must be eligible for deduction (salary and wage costs are excluded)
• 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. For example:

• digital enabling items – computer and telecommunications hardware and equipment, software, 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; and
• e-commerce – supporting digitally ordered or platform enabled online transactions.

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

Remember that the bonus deduction applies to the proportion of the expenditure that is for an assessable income producing purpose not private use.

What you can’t use it for

The bonus deduction does not cover:

• General operating costs, i.e., employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells.
• 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

How does the Skills and Training Boost work?

The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees delivered in person in Australia or online and by training organisations registered in Australia.

Eligibility for the Skills and Training Boost

To be eligible for the bonus deduction:

• 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.
• There must be a connection between the training provided and how the business produces its income.

Only the amount charged by the training organisation is deductible. In some circumstances, this might include incidental costs such as manuals and books, but only if charged by the training organisation.

Some exclusions 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.

Contact TaxAssist Accountants

If you need any help or advice this tax time, please contact us on 1300 513 332 or complete our contact form for a free initial consultation.

Date published 26 Jun 2023