Updated August 2023
If you are looking to take advantage of digital technologies, or build a better trained and more productive workforce, there may be extra tax deductions for you to keep in mind when considering your budgets and expenditures in these areas. The Skills and Training Boost and the Technology Investment Boost are now law and may be utilised for a short time to help your business.
The “boosts” are available to small businesses, being those with aggregated annual turnover of less than $50 million. The boosts are in the form of an additional 20% income tax deduction (caps apply) for the eligible expenditure, effectively providing a 120% tax deduction overall. Normal income tax deduction rules apply to the first 100% deduction, with extra eligibility requirements applying for the additional 20%. A brief overview of the boosts follows.
Skills and Training Boost
In the context of helping to address skills shortages, the Skills and Training Boost is aimed at assisting small businesses in upskilling existing staff or training new staff.
In order for training expenditure to be eligible for the bonus deduction, it must be charged by a training provider registered with one of the following government authorities at the time the expenditure is incurred:
- Tertiary Education Quality and Standards Agency (TEQSA)
- Australian Skills Quality Authority
- Victorian Registration and Qualifications Authority
- Training Accreditation Council of Western Australia.
The bonus deduction is available for training provided either in-person in Australia, or online, but only for “employees”. Training expenses for persons other than employees (e.g. sole traders, partners or independent contractors) are thus not eligible for the boost.
This measure is backdated to 29 March 2022, and is available until 30 June 2024. Both the incurring of the expenditure as well as the enrolment for the training must fall within this timeframe. The timing of the bonus tax deduction will vary depending on the financial year for the business, although generally lines up with when the costs are incurred. However, for costs incurred from 29 March 2022 to 30 June 2022 for businesses with a 30 June year end, the 20% boost applies in the 2023 financial year.
Technology Investment Boost
The Technology Investment Boost aims to assist small businesses to take advantage of digital technologies, cited as being key to a stronger, productive and resilient economy.
Expenses eligible must be incurred “wholly or substantially” for the purposes of digital operations or digitising the operations. Relevant expenditure may include for:
- Digital enabling items that form and facilitate the use of computer networks, such as hardware, software and related systems
- Digital media and marketing, including audio and visual content accessible via digital devices
- E-commerce related items that facilitate online transactions (digital ordering or online platforms for goods and services)
- Cyber security systems, backup management and monitoring services.
Specific exclusions do apply for costs that are not “directly” related to the above. This includes for salary and wage costs, interest and financing costs, capital works (broadly building and structural improvements), trading stock, and training and education costs (covered in the other boost).
Notably, the maximum bonus deduction available under this particular boost is capped at $20,000 per income year. This means a business could claim for a maximum of $200,000 in expenses incurred across the life of the scheme ($100,000 per year).
There are special rules that apply to depreciating assets, which largely ignores whether an asset is deducted immediately or over time, and the 20% boost is applied on purchase (calculated on the asset’s acquisition cost).
This measure is backdated to 29 March 2022, but is only available for expenses incurred until 30 June 2023 (one year less than the Skills and Training Boost). Similar to the Skills and Training Boost though, timing of the deduction will vary (generally in the year incurred), and there is a similar delay in claiming expenses incurred during the 2022 financial year (for 30 June year ends).