Small business technology investment boost and skills and training boost

The technology investment boost and skills and training boost for small businesses is now law.

On 29 March 2022, as part of the 2022–23 Budget, the then government announced it would support small business through these new measures. The measures became law on 23 June 2023.

The Act introduces the technology investment boost and the skills and training boost for small businesses (with aggregated annual turnover of less than $50 million). Both boosts allow eligible businesses to claim a ‘bonus’ tax deduction equal to 20 per cent of qualifying expenditure.

This outlines how the rules for both boosts work, and the practical implications also.

Here is a handy summary:

 Small business technology investment boost.

Small businesses (with an aggregated annual turnover of less than $50 million) can deduct an additional 20% of the expenditure incurred for the purposes of business digital operations or digitising its operations on business expenses and depreciating assets such as portable payment devices, cyber security systems or subscriptions to cloud based services.

The technology investment boost provides eligible businesses with access to a bonus deduction equal to 20 per cent of their eligible expenditure incurred on expenses and depreciating assets for the purposes of their digital operations or digitising their operations between 7.30pm on 29 March 2022 and 30 June 2023.

To be eligible for the bonus deduction:

• the expenditure must be eligible for a deduction under another provision of the taxation law,
• the expenditure must be incurred between 7.30pm on 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,

Eligible expenditure…

To be eligible for the bonus deduction, expenditure must be incurred wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations. That is, the eligible expenditure must have a direct link to the entity’s digital operations for its business.

According to the legislation, expenditure on digital operations or digitising operations may include, but is not limited to, business expenditure on:

• 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 and 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.

Small business skills and training boost.

Small businesses (with an aggregated annual turnover of less than $50 million) will be able to deduct an additional 20% of expenditure that is incurred for the provision of eligible external training courses to their employees by registered providers in Australia.

Eligible entities…

An entity will be eligible for the bonus deduction if, in the income year the expenditure is incurred, it is:

• a ‘small business entity’ – an entity that carries on business with an aggregated annual turnover of less than $10 million.

The bonus deduction will be calculated based on eligible incurred expenditure which meets the following criteria:

• 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 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 already be deductible under the taxation law,
• the expenditure must be incurred within a specific period — between 7.30 pm on 29 March 2022 and 30 June 2024,
• the expenditure must be for the provision of training, where the enrolment or arrangement with the registered training provider for the provision of the training occurs at or after 7.30 pm on 29 March 2022. That is, payment made for an invoice received within the eligible timeframe is not eligible if the training was delivered prior to that timeframe.

Please note – the cost of in-house or on-the-job training is not eligible expenditure for the purpose of the bonus deduction.

Please note – expenditure for training persons other than employees is not eligible. For example, the bonus deduction is not available for the training of non-employee business owners such as sole traders, partners in a partnership and independent contractors.

Businesses may continue to deduct expenditure that is ineligible for the bonus deduction in accordance with the existing tax law.

Summary of implications for 30 June 2023

The technology investment boost ends on 30 June 2023 (unlike the skills and training boost which runs for another year). Taxpayers with intentions to invest in the digitalisation of their business will only be able to benefit from the boost if they incur the expenditure by 30 June 2023.

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