How does it work?
As part of the technology investment boost, small businesses are eligible to claim a deduction equal to 20% of eligible costs incurred in relation to business expenditures and depreciating assets to support their digital operations, with a maximum deduction of $20,000 per year.
This boost allows some small businesses to claim an additional deduction of 20% on the eligible costs of providing employees with external training.
Who is it intended for?
Small businesses with revenue under $50 million are eligible for both tax incentives.
In order to qualify for expenditures, the following criteria must be met:
Technology investment boost
- the costs must be incurred from 29 March 2022 to 30 June 2023;
- Other tax laws must allow deductions for the expenditure;
- If the expenditure is for a depreciating asset,it must be first used or installed and ready for use by 30 June 2023.
A few examples of expenditures supporting digital operations include:
- Hardware, software, internet costs, and services that enable and form computer networks – digital enabling items;
- Audio and visual content for digital devices;
- Online transactions facilitated by digitally ordered or platform-enabled platforms, as well as subscriptions to cloud-based services;
- Services for monitoring and securing cyberspace.
Salaries, wages, and other expenses incurred in developing in-house software are not eligible for bonus deductions.
Generally, small business entities can deduct the cost of a depreciating asset in one income year or over its effective life. There is a 20% bonus deduction, no matter what method of deduction an entity uses.
Skills and training boost
To qualify for bonus deductions under this measure, expenditures must meet the following criteria:
- Incurred from 29 March 2022 and 30 June 2024
- Employees may receive external training in Australia or online (regardless of where they are located). Therefore, the bonus deduction does not apply to on-the-job training or in-house training.
- For the purpose of training arranged or enrolled after 29 March 2022;
- It must be related to business in order to be deductible under tax law.
- The training program must also be within the scope of the training provider’s registration and be charged to the small business entity directly or indirectly.
Therefore, where incidental costs are incurred unless they are charged by the registered training provider, they will not qualify for bonus deductions.
- Neither the small business entity nor its associates may be the supplying registered training providers.
It is important to note that the incentive is only available to employees. Consequently, this provision does not apply to training provided to:
- Business owners who are not employees, such as sole traders or partners in a partnership
- contractors to a business.
When can the bonus tax deduction be claimed?
Both tax incentives have special rules for when entities can claim bonus deductions on their income tax returns. The timing of the bonus deduction will be determined by when expenditures are incurred and depending on balance dates.
If you have questions, please email them to [email protected] or book a meeting to discuss.
