Advivo explains how to save tax with some Federal Government initiatives
You may recall that two of the new items included in the last Federal Budget of the prior government in March 2022 were a Technology Investment Boost and a Skills and Training Boost.
These have now been resurrected by the new Federal Government and are in the process of being legislated. Consequently, the information below is not set in stone but provides a guide on these two useful new tax-saving measures for businesses.
Technology Investment Boost
From the Treasury website:
The Technology Investment Boost will support digital adoption by small businesses (with aggregated annual turnover less than $50 million) by providing a bonus 20 per cent tax deduction for eligible expenditure incurred on expenses and depreciating assets that support digital operations.
The boost will apply from 7:30 pm (AEDT) on 29 March 2022 until 30 June 2023. An annual cap will apply so that expenditure up to $100,000 will be eligible for the boost, with the bonus deduction capped at $20,000 per year.
This equates to a “new” tax reduction of 5c per $1 spent on qualifying items for small business companies above the existing 25c tax reduction.
The focus of the measure is to “support digital operations”. As such, some common costs that may be covered by this once legislation is finalised, passed, and has received royal asset would include:
- Digital enabling items – think hardware, software, systems, and services that help your business with establishing, updating, and using its computer networks
- Digital media and marketing – not just digital marketing but also anything that is used or stored on digital devices such as moving business systems from paper to digital or from one digital database to a more modern digital system
- E-Commerce – activity supporting online transactions
Items excluded are likely to encompass:
- Salary and wages costs (ie internal staff costs involved in digitalisation work)
- Financing costs (funding the work)
- Training and education costs (may be covered by the new Skills and Training Boost)
- Trading stock (if your business buys and sells items that would qualify to the end consuming business)
This measure is currently in the consultation phase and further information can be found on the Treasury website https://treasury.gov.au/consultation/c2022-305555
Skills and Training Boost
From the Treasury website:
The Skills and Training Boost will provide small businesses (with aggregated annual turnover less than $50 million) with access to a bonus 20 per cent tax deduction for eligible expenditure incurred on external training delivered to their employees by providers registered in Australia.
The boost will apply to eligible expenditure incurred from 7:30 pm (AEDT) on 29 March 2022 until 30 June 2024.
This equates to a “new” tax reduction of 5c per $1 spent on qualifying items for small business companies above the existing 25c tax reduction.
The focus of this measure is to upskill existing or new employees of businesses.
We can see quite a few catches with this measure, as it is much more limited than I suspect most business owners would like. Limitations appear to include:
- Training must be provided by external arms-length Registered Training Providers.
- Cannot be used for training for non-employees such as sole traders, partners in a partnership and independent contractors. Only for employees in the ordinary meaning.
- Training needs to be in person if the employee is in Australia, or online if not in Australia.
- Incidental costs to the training will only qualify if they are charged by the registered training provided eg books to accompany the training. This would seem to exclude costs such as travel from the new deduction.
- Training provided by a registered training provider must be within the scope of what they are registered for.
If a training program fits within these parameters, it is sure to provide a nice additional deduction for qualifying businesses.
This measure is currently in the consultation phase and further information can be found on the Treasury website https://treasury.gov.au/consultation/c2022-305552 .
What should I do now?
Whilst it is great for businesses that these measures have been resurrected until the legislative process has been completed and they are law, we would advise against rushing to spend on areas covered by the measures unless it makes perfect commercial sense for your business to be doing so. This is what we always recommend when it comes to investing your business dollars – it needs to make commercial sense with a tangible return on your investment from doing so.
What we would recommend is to review how items that you are already paying for are categorised in your accounting records. Ensure these are easily identified, perhaps in different ledger accounts that are logical, and you have documents of what these accounts are. This will enable us to identify and claim these items when the time comes to maximise your tax benefit easily and quickly. If you would like assistance with reviewing your ledger for this, please contact us.