In this year’s federal budget, amid the headlines and electioneering, came some important tax breaks for small businesses to incentivise the uptake of new technology.
There were in fact two separate tax incentives announced, one designed for business technology purchases and one for skills and training.
The twin measures are known as the ‘Small Business Technology Investment Boost’ and the ‘Small Business Skills and Training Boost’.
Dr Jane Rennie, CPA Australia’s general manager of external affairs, was exuberant about the newly minted measures:
“CPA Australia research shows that Australian small businesses have some of the lowest levels of digital capability in the Asia-Pacific region.
The technology investment boost and the skills and training boost are welcome. These two programs go hand in hand and will help establish Australia as a top 10 digital economy.”
Let’s unpack these new measures to better understand how they work, who they apply to, and how you can put them to use in your own business.
Be aware that this legislation is yet to be passed.
What is the new 20% Small Business Technology Investment Boost?
In order to remain competitive and to foster a healthy small business economy, it’s paramount that your business technology keeps pace with competitors and global trends.
Back in March, Treasurer Josh Frydenberg announced this SME tax break during the rollout of the 2022 federal budget. You could be forgiven for missing this detail, so let’s unravel the nuts and bolts of the incentive.
The aim
The Small Business Technology Investment Boost aims to give SMEs a financial leg up when purchasing and adopting new business technology.
In his budget speech, Josh Frydenberg stated that the government wanted to “reward and encourage businesses embracing the digital revolution”. This tax break seeks to fulfil that aim.
The details
The Small Business Technology Investment Boost comes in the form of a 120% write off. This means, that on top of your allowable 100% deduction for eligible business technology, you can now deduct an extra 20%.
As an example, Josh Frydenberg says,
“for every hundred dollars a small business spends on training their employees, they will get a $120 tax deduction.”
Eligible spending will be capped at $100,000 per annum.
If passed, this will come into effect for your 2022/23 tax return. This means you can claim the additional 20% bonus deduction for the period of 1 July 2022 until 30 June 2023.
What can you boost?
Eligible purchases include depreciating technology related assets and expenses, such as:
- cloud technology subscriptions
- point of sale systems
- cyber security
- websites
- computer equipment and assets
Who is it for?
The cap for eligibility sits at $50 million per annum in aggregated turnover. This means that the vast bulk of small and medium businesses in Australia will be able to get their hands on the tax break.
What is the new 20% Small Business Skills and Training Boost?
The Small Business Skills and Training Boost is a distinct measure designed to assist small businesses in increasing the skill base of their employees.
The aim
As the need to embrace new technology rises, so too does education and training to augment employee’s technological capability and understanding. While not specifically aimed at technology courses, these two measures can go hand in hand to improve both technology skills and tools.
To this end, the government is essentially providing tax incentives to those Australian SMEs that engage with and sign up for external training courses.
The details
Some of the key details are yet to be formalised, however, as with the technology investment boost, we do know that the same 20% bonus deduction will apply. As opposed to the technology boost, the training boost will also apply to the tax year 2023/24 as well as 2022/23.
What can you boost?
While the exact scope is currently being honed, by analysing the budget papers, we can see that it entails engaging with recognised external providers.
“External training courses will need to be provided to employees in Australia or online and delivered by entities registered in Australia,”
noted Frydenberg.
As such, it seems that in-house training will not be covered.
It’s also likely that the course providers will need to be registered with Australian Skills Quality Authority or listed by the Tertiary Education Quality and Standards Agency.
Who is it for?
Like the small business technology investment boost, the new small business skills and training boost will be offered to those SMEs turning over less that $50 million per annum.
Further resources and considerations
As with all business taxation matters, it’s prudent to always consult with your accountant or bookkeeper before making purchases or counting on tax breaks.
It’s important to note that these measures are not yet law.
For a full rundown on the pair of incentives, please refer to the official ATO webpage.
