The 120% technology and skills ‘boost’ deduction
The 120% skills and training, and technology costs deduction for small and medium business have passed Parliament.
To utilise the technology investment boost, you had to of purchased the technology and when it comes to acquiring eligible assets, installed it ready for use by 30 June 2023.
Who can access the boosts?
Small business entities (individual sole traders, partnership, company or trading trust) with an aggregated annual turnover of less than $50 million. Aggregated turnover is the turnover of your business and that of your affiliates and connected entities.
$20k technology investment boost
The Technology Investment Boost provides SMEs with a bonus deduction for expenses and depreciating assets for digital operations or digitising from 7:30pm (AEST) on 29 March 2022 until 30 June 2023.
You ‘incur’ an expense when you are in debt for it; this might be a tax invoice or it might be a contract where you are legally liable for the cost.
For depreciating assets, like computer hardware, there is an extra step. The technology needs to have been purchased and installed ready for use.
The types of expenses that might be eligible for the technology boost include:
· Digital enabling items - computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;
· Digital media and marketing - audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
· E-commerce - goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; or
· Cyber security - cyber security systems, backup management and monitoring services.
The technology also must be “wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations”. That is, there must be a direct link to your business’s digital operations. Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria. Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for business use.
There are a few costs that the technology boost won’t cover such as costs relating to employing staff, raising capital, construction of business premises, and the cost of goods and services the business sells.
The boost will not apply to:
· Assets that you purchased but then sold within the relevant period (e.g., on or prior to 30 June 2023).
· Capital works costs (for example, improvements to a building used as business premises).
· Financing costs such as interest expenses.
· Salary or wage costs.
· Training or education costs, that is, training staff on software or technology won’t qualify (see Skills and Training Boost).
· Trading stock or the cost of trading stock.
The good news for many eligible businesses is that your technology subscriptions and other products you use in your business might qualify for the boost.
The Skills and Training Boost
The Skills and Training Boost gives you a 120% tax deduction for external training courses provided to employees. The aim of this boost is to help SMEs grow their workforce, including taking on less-skilled employees and upskilling them using external training to develop their skills and enhance their productivity.
Sole traders, partners in a partnership, independent contractors and other non-employees do not qualify for the boost as they are not employees. Similarly, associates such as spouses or partners, or trustees of a trust, don’t qualify.
As always, there are a few rules:
· Registration for the training course had to be from 7:30pm (AEST) on 29 March 2022 until 30 June 2024. If an employee is part the way through an eligible training course, enrolments in courses or classes after 29 March 2022 are eligible, not before.
· The training needs to be deductible to your business under ordinary rules. That is, the training is related to how the business earns its income.
· A registered training provider needs to charge your business (either directly or indirectly) for the training (see What organisations can provide training for the boost).
· The training must be for employees of your business and delivered in-person in Australia or online.
· The training provider cannot be your business or an associate of your business.
Training expenditure can include costs incidental to the training, for example, the cost of books or equipment necessary for the training course but only if the training provider charges the business for these costs.
What organisations can provide training for the boost?
Not all courses provided by training companies will qualify for the boost; only those charged by registered training providers within their registration. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than 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 training you might want to have engaged might not be delivered by registered training organisations, there is still a lot out there, particularly the short-courses offered by universities, or the flexible courses designed for upskilling rather than as a degree qualification. If you have recently completed performance reviews for staff and training is part of their development pathway, it might be worth exploring.
Note: The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, contact the team @ Clear Accounting Solutions to discuss your circumstances.