The Government has opened submissions for a 120 percent deduction for tech and training investment, bringing previous Federal Budget announcements one step closer to becoming reality.

Business leaders have applauded the move to legislate two measures that will allow organisations with turnover under $50 million to claim spending on digital solutions and training backdated to March.

The measures, dubbed the Small Business Technology Investment Boost and the Small Business Skills and Training Boost were announced as initiatives by the previous Government in its March Federal Budget and have now been released as draft legislation for introduction into Parliament later this year.

In a joint announcement by Treasurer Jim Chalmers, Small Business Minister Julie Collins and Assistant Treasurer Stephen Jones, the tax incentives were described as a way to ease the burden of upskilling for small businesses.

“The Government recognises that training employees is expensive and takes time, both of which are at a premium when employers are trying to run a small business,” the ministers said.

“These measures will make it easier for small businesses and help them recoup some of the costs of the investments they make in their employees and digital operations.”

The Small Business Technology Investment Boost

Under the proposed legislation, the boost offers a bonus 20 percent deduction on business expenditure relating to support digital operations.

What can a small business deduct?

At this stage the scope for claiming the digital boost is broad, covering anything that supports the digitisation of operations as well as ongoing investments of a digital nature, such as software licenses, subscriptions and related hardware.

However, the digital tax boost only applies on expenditure up to $100,000 in total, making the maximum deduction available to small businesses $20,000.

When does it apply?

Currently, the digital boost applies to expenses incurred from 7.30pm on 29 March 2022 through to 30 June 2023.

What isn’t included?

Several types of expenditure aren’t covered by the boost, such as:

  • Salary and wages
  • Capital works that can be deducted under Division 43 of ITAA 1997
  • Financing
  • Training and education (however, these may be covered by the skills and training boost)
  • Spending associated with the trading of stock

For further information, you can find the draft legislation and explanatory materials for the Technology Investment Boost on the Treasury website.

The Small Business Skills Investment Boost

Similar to the tech boost, the Skills Investment Boost enables an additional 20 percent deduction on small business spending on external training and education of staff.

What can a small business deduct?

According to the draft legislation, the incentive applies to any training for employees conducted in Australia or online, however the expenditure must be charged by a Registered Training Organisation.

The training must also be already deductible under tax law and can’t be offered by the business (or an associate of the business) that is claiming the deduction.

When does it apply?

The skills boost will also be backdated to March, applying from 7.30pm 29 March 2022 and is set to continue to 30 June 2024.

For more details on the Skills Investment Boost, you can find the draft legislation as well as explanatory materials on the Treasury website.

Budgetary win for business

With the new Government set to hand down a second Federal Budget in October, the announcement of these initiatives is being seen as a positive move by business leaders around the country.

And, with MYOB modelling suggesting that nearly half a million Australian small businesses have little to no engagement with digital tools, both initiatives are likely to have a big impact.

“Businesses with meaningful engagement with digital are 50 percent more likely to grow revenue,” said MYOB CEO Greg Ellis.

“They’re eight times more likely to create jobs. They are 14 times more likely to come up with new products or services.

“Productivity is what Australia needs; making sure every business is a digital business needs to be one of our top priorities,” he said.

The sentiment was echoed in a statement from Council of Small Business Organisations Australia CEO Alexi Boyd.

“It is essential to incentivise digitisation to make our small businesses stronger, more productive, and more resilient to future economic shocks.”

Meanwhile, Australian Small Business and Family Enterprise Ombudsman Bruce Billson pointed to more specific benefits.

“The digital tax break will allow [businesses] to invest in items such as cyber security systems, cloud-based services, accounting or eInvoicing software, hardware such as laptops and portable payment devices.

“For a small business, the cost of training staff can be quite significant, and this deduction will support owners to make an investment in upskilling staff to drive productivity and competitiveness.”

The draft legislation for both initiatives is open for consultation until 19 September.

Source: MYOB August 2022

Reproduced with the permission of MYOB. This article by Campbell Phillips was originally published at https://www.myob.com/au/blog/digital-and-training-tax-incentives-return/

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