Thursday night, both houses of Parliament passed Treasury Laws Amendment (2022 Measures No. 4) Bill 2022, and I know what you’re thinking…. so what?
Well, let’s find out so what. Two measures included in the bill are definitely worth further discussion.
Small Business Technology Investment Boost
Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction to support their digital operations and digitise their operations.
The boost applies to eligible expenditure incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2023. The boost is for business expenses and depreciating assets and is capped at $100,000 of expenditure per income year. You can receive a maximum bonus deduction of $20,000 per income year.
Eligibility
To access the small business technology investment boost, your business needs to be a small business entity. Your aggregated annual turnover must be less than $50 million for the income year in which you incur the expenditure.
The expenditure must:
- already be deductible for your business under taxation law
- be incurred between 7:30 pm AEDT 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 for a taxable purpose by 30 June 2023.
What you can claim
Eligible expenditure 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 or 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
- cyber security
- cyber security systems, backup management and monitoring services.
Cap on the bonus deduction
An annual cap applies so that expenditure up to $100,000 is eligible for the bonus deduction, with the bonus deduction capped at $20,000 per year. The maximum bonus deduction a business can claim is $40,000 for the entire period.
What about assets I’ve purchased?
The bonus deduction can also apply to expenditure on a depreciating asset. The asset must be first used or installed ready for use for a taxable purpose between 7:30 pm AEDT 29 March 2022 and 30 June 2023. This rule does not apply to expenses incurred in the development of in-house software allocated to a software development pool, consistent with current pooling rules.
The bonus deduction is calculated as 20% of the expenditure on the eligible depreciating asset. This is if the expenditure occurs in the relevant period and it is first used or installed ready for use for a taxable purpose before 1 July 2023. That is regardless of the depreciation method the business uses. If a business purchases a depreciating asset in the relevant period, the expenditure will be the cost of the asset.
Small Business Skills and Training Boost
Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction for external training courses delivered to employees by registered training providers.
The boost applies to eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2024.
Eligibility
To access the small business skills and training boost, your business needs to be a small business entity. Your aggregated annual turnover must be less than $50 million for the income year in which you incur the expenditure.
The expenditure must be:
- for the provision of training to employees of your business, either in-person in Australia, or online
- charged, directly or indirectly, by a registered external training provider that is not you or an associate of yours
- already deductible for your business under taxation law
- incurred within a specified period (between 7:30 pm AEDTor by legal time in the ACT on 29 March 2022 and 30 June 2024).
Where the training is a component of a larger program or course of training, the enrolment or arrangement relating to the relevant expenditure must be made or entered into at or after 7:30 pm (by legal time in the ACT) on 29 March 2022.
What you can claim
The bonus deduction is available for expenditure for the provision of training to one or more employees of your business. The training provider must meet certain registration criteria for the bonus deduction. You can check for registered providers at training.gov.au.
Training expenses can include incidental costs related to the provision of training, provided they are charged by the registered training provider, such as the cost of books or equipment needed for the course.
If your business is registered for GST and the training is not GST-free, the bonus deduction is calculated on the GST exclusive amount plus any GST you cannot claim as a GST credit in carrying on your business.
Where deductions are to be claimed over time such as for capital deductions, the bonus deduction is calculated as 20% of the full amount of the eligible expenditure. It can be claimed upfront in the first income year in which the bonus deduction is available.
What you can’t claim
You can’t claim expenditure for:
- training of non-employee business owners such as sole traders, partners in a partnership or independent contractors
- costs added on an invoice by an intermediary on top of the cost of training, such as commissions or fees, as they are not charged directly or indirectly by the registered training provider.
For more information on either the Small Business Technology Investment Boost, or the Small Business Skills and Training Boost, don’t hesitate to get in touch.
