If you are a small business, now is the time to invest in your business training and technology, with your spending on eligible expenditures likely to secure you an additional 20% tax deduction.
The two boosts (the Skills and Training Boost and the Technology Investment Boost) were originally announced as part of the 2022-23 year budget in March 2022, with the intention to incentivise the digitisation of business and upskilling of employees for small businesses with aggregated turnover under $50 million. While the measures are yet to be passed into law, it is important to consider the impact these measures may have for your 2023 tax position. So – what do you need to consider when you are looking at spending money in these areas, and in conjunction with your 2023 year-end planning?
Technology Investment Boost
- The expenditure must be substantially related to your business’s digital operations or the digitisation of its operations;
- If your business lodges on the standard July to June financial year, the expenditure must be incurred between 7:30 pm on 29 March 2022 and 30 June 2023; if your business lodges on a substituted accounting period, different rules will apply;
- The Technology Investment Boost only applies to expenditures of up to $100,000 in the two financial years covered by the boost. This means that if your business has spent $100,000 or more in each of the relevant financial years, you will receive the maximum benefit of an additional $40,000 tax deduction;
- The boost for both years is applied in the 2023 tax return for entities lodging under the July to June financial year;
- Examples of expenses that would fall into these categories include portable payment devices, cyber security systems, cloud-based software subscriptions, and some computer equipment. We expect to hear more from the ATO about specific eligible expenses once these measures have been passed into law – for example, cloud-based accounting software subscriptions, projects undertaken to integrate CRM and accounting softwares, or prepayment of any other eligible costs;
- For depreciating assets such as computer equipment or portable payment devices, the asset must be delivered, installed, and ready for use in your business to be eligible for the boost;
- Specifically excluded expenditure includes wages, capital works, financing costs such as interest or borrowing costs, training costs, expenditure that forms part of your trading stock, or expenditure that is specifically denied a deduction under any other tax law provision;
Skills and Training Boost
- The expenditure must be incurred to provide in-person training (in Australia) or online training for one or more of your employees;
- If your business lodges on the standard July to June financial year, the expenditure must be incurred between 7:30 pm on 29 March 2022 and 30 June 2024; if your business lodges on a substituted accounting period, different rules will apply;
- Your business or staff must not have been enrolled in the course prior to 7:30 pm on 29 March 2022, even if the associated expenditure did not fall due until after this time;
- For entities lodging under the July to June financial year, the boost for expenditure in the 2022 and 2023 years is applied in the 2023 tax return. The boost for expenditure incurred in 2024 will be applied in the 2024 year return;
- The training must be provided by an eligible registered body that is not an associate of your business. To be eligible for the Skills and Training Boost, the training provided by the registered body must be within that body’s scope of registration;
- Unlike the Technology Investment Boost, there is no upper limit on the eligible spend;
- Specifically excluded expenditure includes on-the-job or in-house training, as well as expenditure that is specifically denied a deduction under any other tax law provision. We expect to hear more from the ATO about any further criteria, such as whether there will be a requirement for the training to relate to the current employment activities of the employee/s undertaking the training.
With 30 June fast approaching, contact your HCQ advisor today to learn more about these measures and make the most of them in relation to your specific circumstances.