We previously posted an article ' What you need to know about the skills and technology boost' back in September 2022. We can now finally report back to you that the legislation passed through the Senate on 21 June 2023 and is now law.
So what does this now mean?
The skills and training boost
Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction for external training courses delivered to employees by registered training providers.
The boost applies to eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2024.
To be eligible expenditure, it must be:
for the provision of training to employees of your business, either in-person in Australia, or online
charged, directly or indirectly, by a registered external training provider that is not you or an associate of yours
already deductible for your business under taxation law
incurred within the specified period (between 7:30 pm AEDT or by legal time in the ACT on 29 March 2022 and 30 June 2024).
Note that the requirement that the expenditure is deductible under the tax law means that if a business is GST-registered, the bonus deduction is generally calculated on the GST-exclusive amount of expenditure. The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2024.
Training providers must be registered in Australia with at least one of the following four government authorities at the time the expenditure is incurred:
Australian Skills Quality Authority (within the meaning of the National Vocational Education and Training Regulator Act 2011);
Tertiary Education Quality and Standards Agency (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011);
Victorian Registration and Qualifications Authority (within the meaning of the Education and Training Reform Act 2006 (Vic)); or
Training Accreditation Council of Western Australia (within the meaning of the Vocational Education and Training Act 1996 (WA)).
Further, the training:
must be within the scope of the registered training provider’s registration at the time the expenditure is incurred
cannot be provided by the business claiming the bonus deduction or any of their “associates” (within the meaning of section 318 of the Income Tax Assessment Act 1936)
can be provided either:
in person to employees physically located in Australia, or
online (employees are not required to be physically located in Australia when undertaking online training - to allow for circumstances in which employees may be temporarily located overseas for operational reasons or working remotely)
cannot be on-the-job and in-house training
cannot be for training persons other than employees - associates are excluded ie a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person.
Training expenditure can include incidental costs such as books or necessary equipment, but cannot include commission or fees charged by intermediaries.
Year skills and training boost claimed:
For most businesses, for eligible expenditure incurred between 7:30 pm AEDT 29 March 2022 and 30 June 2022, you:
claim the 100% deduction for this period in your 2021–22 tax return
claim the 20% bonus incurred in this period in your 2022–23 tax return.:
For eligible expenditure incurred between 1 July 2022 and 30 June 2023 (2022–23 income year) you claim both the 100% deduction for the expenditure and the 20% bonus deduction in your 2022–23 tax return.
Special rules will apply to taxpayers who are early balancers.
The bonus deduction is not available for training non-employee business owners such as sole traders, individual partners in a partnership and independent contractors (who are not “employees” of the business within the ordinary meaning of this term).
The technology invesment boost
Small businesses that have an aggregated annual turnover of less than $50 million will be able to deduct an additional 20% of the cost incurred on eligible business expenses and depreciating assets for your business digital operations or digitising your operations.
As with the skills and training boost, the bonus deduction is generally calculated on the GST-exclusive amount of expenditure.
An annual cap will apply in each qualifying income year so that expenditure up to $100,000 will be eligible for the boost.
The boost will apply to eligible expenditure incurred from 7:30pm (AEDT) on 29 March 2022 until 30 June 2023 so you need to act fast.
Eligible technology expenses
Eligible expenditure may include, but is not limited to, business expenditure on:
digital enabling items – computer and telecommunications hardware and equipment, software, 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
cyber security – cyber security systems, backup management and monitoring services.
The following kinds of expenditure are specifically excluded from this boost:
Salary or wage costs
Capital works costs that are deductible under Division 43 of the Income Tax Assessment Act 1997
Financing costs, including interest, payments in the nature of interest and expenses of borrowing
Training or education costs (these may be eligible for the Small business skills and training boost)
Expenditure incurred that forms part of, or is included in, the cost of trading stock.
Eligible depreciating assets expenses
The bonus deduction will be equal to 20 per cent of the cost of an eligible depreciating asset that is used for a taxable purpose, regardless of whether the asset is fully expensed under the temporary full expensing regime or a deduction is claimed under the uniform capital allowance regime based on the asset’s decline in value over its effective life. Also, repairs and improvement costs expenditure for depreciating assets will be eligible provided the costs are incurred during the relevant period.
The following expenses are not eligible for the boost, expenditure:
that is incurred in the development of in-house software allocated to a software development pool
of depreciating assets if a balancing adjustment event occurs to the asset while the entity holds it during the relevant period, unless the balancing adjustment event is an involuntary disposal – to prevents an entity from claiming the bonus deduction if it sells the asset within the relevant period.
For expenditure that has a mix of business and private use, the bonus deduction is available only to the proportion of the business expenditure. However, when claiming the bonus deduction for expenditure on a depreciating asset, it will be assumed that the entity will continue to hold the asset throughout its effective life and the entity will use the asset for a taxable purpose to the same extent that it does in the income year it first uses or installs the asset. This eliminates the need for subsequent adjustments to the boost should the taxable use of an asset change over time.
Year technology investment boost claimed:
For most businesses, for eligible expenditure incurred between 7:30 pm AEDT 29 March 2022 and 30 June 2022, you:
claim the 100% deduction for this period in your 2021–22 tax return and
claim the 20% bonus incurred in this period in your 2022–23 tax return.
For eligible expenditure incurred between 1 July 2022 and 30 June 2023 you claim both the 100% deduction for the expenditure and the 20% bonus deduction in your 2022–23 tax return.
Special rules will apply to taxpayers who are early balancers.
Summary
The new tax incentives provides small businesses with significant tax relief through the skills and training boost and the technology investment boost. By understanding the eligibility criteria and timeframes for these boosts, small business owners in Australia can take full advantage of the tax benefits and invest in skill development and technological advancements to support their business growth.
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