The legislation granting small and medium businesses (SMBs) the opportunity to claim a 120% tax deduction for technology expenses, skills training and training costs has finally passed Parliament, nearly a year after the announcement in the 2022-23 Federal Budget.
However, there are a few timing complexities involved. To benefit from the technology investment boost, you needed to have purchased and installed the technology by 30 June 2023, which was just seven days after the legislation was passed.
- Under both the technology and Skills and Training Boost, eligible expenses will be available for the 120% deduction if they were incurred between 29 March 2022 and 30 June 2024
- The bonus deduction for the technology boost is capped at 20% of the eligible expenditure, up to a limit of $20,000 ($100,000 of eligible expenditure)
- There is no limit for the skills and training boost.
Who is eligible for the boosts?
Small business entities (including individual sole traders, partnerships, companies or trading trusts) with an aggregated annual turnover of less than $50 million can access the 120% skills and training boost, as well as the technology boost. Aggregated turnover includes the turnover of your business, affiliates and connected entities.
The technology investment Boost
Expenses that may qualify for the technology boost include:
- Digital enabling items like computer hardware, telecommunications equipment, software, internet costs, computer network systems and services that facilitate their usage.
- Digital media and marketing expenses including audio and visual content that can be accessed, stored or viewed on digital devices, as well as web page design.
- E-commerce goods or services that support digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitisation such as guidance on digital tools for business continuity and growth.
- Cybersecurity systems, backup management and monitoring services.
The technology must be primarily or substantially used for a business’s digital operations or digitisation. There must be a direct connection to how the business generates income, particularly through its digital operations.
There are several costs that the technology boost does not cover, such as expenses related to staff employment, capital raising, construction of business premises and the cost of goods and services sold by the business. The boost does not apply to:
- Assets purchased and sold within the relevant period (on or before 30 June 2023)
- Capital works costs, including improvements to business premises
- Financing costs like interest expenses
- Salary or wage costs
- Training or education costs, meaning that training staff on software or technology does not qualify (refer to Skills and Training Boost below)
- Trading stock or the cost of trading stock.
The Skills and Training Boost
The Skills and Training Boost is a program that provides SMBs with a 120% tax deduction for external training courses offered to their employees. The primary objective of this boost is to facilitate the growth of SMBs’ workforce by enabling them to hire and upskill less-experienced employees through external training. This initiative aims to enhance their skills and increase overall productivity.
Please note that sole traders, partners in a partnership, independent contractors and other non-employees are not eligible for the boost as it is specifically designed for employees. Similarly, associates such as spouses or partners, as well as trustees of a trust, are not qualified to participate.
To ensure compliance, there are a few rules to be aware of:
- Registration for the training course must have occurred between 7:30 PM (AEST) on 29 March 2022 and 30 June 2024. If an employee is already enrolled in an eligible training course, enrolments in subsequent courses or classes after 29 March 2022 are considered eligible.
- The training must be deductible to your business according to ordinary rules, meaning it should be directly related to how your business generates income.
- The training needs to be provided by a registered training provider who charges your business (either directly or indirectly) for the training. (Please refer to the section on “What organisations can provide training for the boost?” below)
- The training must be intended for employees of your business and should be delivered either in-person within Australia or through online platforms.
- The training provider cannot be your business or an associate of your business.
Training expenditure can include costs associated with the training, such as resources or equipment necessary for the course, provided that the training provider charges your business for these expenses.
What organisations can provide training for the boost?
Please note that not all courses offered by training companies will qualify for the boost. Only courses offered by registered training providers within their registration will be eligible. Typically, these providers offer vocational training to acquire a trade or courses that contribute to a formal qualification, rather than purely professional development.
Qualifying training providers will be registered by:
- Tertiary Education Quality and Standards Agency (search the register – includes States and Territories)
- Australian Skills Quality Authority (ASQA)
- Victorian Registration and Qualifications Authority (search the register)
- Training Accreditation Council of Western Australia
While some desired training may not be delivered by registered training organisations, there is still a wide range of options available. Short courses offered by universities or flexible courses designed for upskilling, rather than obtaining a degree qualification, can still be explored, especially if they align with the development pathway identified through recent performance reviews for your staff.