On 23 June 2023, The Small Business Technology Boost and the Small Business Skills and Training Boost tax incentives were enacted and are now law. These measures allow eligible small businesses to claim an additional 20% in ‘bonus tax deductions’ on eligible spending.
Small Business Technology Investment Boost
Businesses with an aggregated turnover of less than $50m can deduct an additional 20% of the expenditure incurred to digitalise their operation, capped at $100,000 excluding GST per annum. The measure will be available for the 2022 and 2023 income years only.
To be eligible for this measure, a small business must:
Incur the eligible expenditure from 7.30pm AEDT on 29 March 2022 to 30 June 2023, and the asset must be first used or installed ready for use by 30 June 2023.
The expenditure must already be an eligible tax deduction under Australian tax law.
The nature of the eligible expenditure is quite broad, but some examples are:
Digital media and marketing expenses.
E-commerce expenses including digital inventory management systems and digital payment systems.
Expenses relating to digitally enabling items such as computers, telecommunications hardware equipment, software and services that facilitate the use of computer networks.
Expenses relating to cyber security infrastructure and data management systems.
An important consideration to note is that there is no restriction on the ability to apply Temporary Full Expensing and the Technology and Investment Boost on eligible expenditures. As a result, there could be considerable upfront tax deductions available.
Small Business Skills and Training Boost
Like the Technology Investment Boost, the Skills and Training Boost allows eligible small businesses to deduct an additional 20% for costs incurred in providing eligible external training courses to their employees. However, this measure is available for the 2022, 2023 and 2024 income years and there is no cap on the amount of expenditure that is eligible.
To be eligible for this measure, a small business must:
Incur the expenditure from 7.30pm AEDT on 29 March 2022 up to 30 June 2024.
Incur the expenditure for the provision of training employees of your business.
The costs must be charged directly or indirectly by a registered training provider.
The training provider must not be an associate of yours.
The expenditure must already be an eligible tax deduction under Australian tax law.
Costs relating to external training advisor courses including:
Training course costs.
Textbooks and other training material costs.
When to claim
Both measures utilise the delayed claim rule which will operate for expenditure incurred from 29 March 2022 to 30 June 2022. Under this rule, normal balancers (entities with a 30 June balance date) will claim a tax deduction on expenditure incurred from 29 July 2022 to 30 June 2022 in the FY22 tax return, however the delayed claim rule will push the 20% bonus deduction into the FY23 tax return.
For expenditure incurred between 1 July 2022 and 30 June 2023 the eligible tax deduction on expenditure incurred, plus the 20% bonus deduction will both be claimed in the FY23 year.
Finally, and only relevant to the Skills and Training Boost, for expenditure incurred between 1 July 2023 and 30 June 2024 the eligible tax deduction on expenditure incurred, plus the 20% bonus deduction will both be claimed in the FY24 year.
Technology Investment Boost example
A business that acquires new computers for their employees on 20 April 2023 at a total cost of $150,000 excl GST, and is eligible and choose to apply the Temporary Full Expensing measure may be able to claim a total tax deduction in relation to this expenditure of $170,000 being:
Temporary Full Expensing deduction of $150,000 (100% of $150,000).
Technology Investment Boost bonus deduction of $20,000 (20% $100,000 capped expenditure).
As the expenditure was incurred in the FY23 year, both the tax deduction and the bonus deduction will be claimed in the FY23 income tax return.
Please get in touch with us today if you would like any additional information regarding these measures and how they may apply to your business.