Government Initiatives

During September 2022 some important federal tax developments occurred. The main developments were the publishing of draft legislation in relation to both the Skills and Training Boost and the Technology and Investment Boost. These boosts are to be available for Australian Small Businesses with an annual Aggregated Turnover of less than $50 million.

LAST UPDATED OCTOBER 2022

Skills and Training Boost

The Albanese Government has released draft legislation and explanatory material relating to the implementation of the Skills and Training Boost to support small businesses to upskill and train their current employees.

The Skills and Training Boost, which was announced by the former Morrison Government in the March 2022 Budget, will provide small businesses with access to a bonus 20% tax deduction for eligible expenditure incurred on external training delivered to their employees by providers registered in Australia.

The boost is to apply to eligible expenditure incurred from 7.30pm (AEDT) 29 March 2022 until 30 June 2024.

The bonus deduction will be available to eligible small businesses that incur expenditure that meets the following criteria:

Expenditure must be for training employees, either online or in person in Australia;
Registered training provider must not be the small business itself nor an associate of the small business;
Expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope of the provider’s registration;
Expenditure must already be deductible under the taxation law; and
Expenditure must be for the provision of training where the enrolment or arrangement for the provision of the training occurs at or after 7.30pm (AEDT) on 29 March 2022.

Technology Investment Boost

The Albanese Government has also released exposure draft legislation and explanatory material relating to the introduction of a Technology Investment Boost to help small businesses operate digitally.

The Technology Investment Boost, which was also announced by the former Morrison Government in the March 2022 Budget, will support digital adoption by small businesses by providing a bonus 20% tax deduction for eligible expenditure incurred on expenses and depreciating assets that support digital operations.

The boost is to apply from 7.30pm (AEDT) on 29 March 2022 until 30 June 2023. An annual cap is to apply so that expenditure up to $100,000 will be eligible for the boost, with the bonus deduction capped at $20,000 per income year. If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use by 30 June 2023.

To be eligible for the bonus deduction, expenditure must be incurred wholly or substantially for the purposes of the small business’s digital operations or digitising their operations. The eligible expenditure must have a direct link to the digital operations of the small business.

Expenditure on digital operations or digitising operations may include, but is not limited to, business expenditure on:

Computers and telecommunications hardware and equipment, software, and systems and services that form and facilitate the use of computer networks;
Audio and visual content that can be created, accessed, store or viewed on digital devices for digital media and marketing; and
Digitally ordered or platform-enabled online transactions to support e-commerce.

There are some types of expenditure that will be ineligible for the bonus deduction even where they would otherwise meet the requirements. These include

Training and education costs;
Financing costs;
Salary and wage costs;
Capital works costs; and
Expenditure that forms part of, or is included in, the cost of trading stock.

Important Considerations

As the legislation introduced in relation to both the Skills and Training Boost and the Technology Investment Boost are drafts, the final form of the two Boosts may differ from that currently contained in the draft legislation and explanatory memorandum.

Another important factor to be aware of is that as with any Tax Concession like this, where the entity claiming the concession is a Company, this would result in the Company having Retained Earnings to which were not subject to Tax (ie. the bonus deduction would reduce Taxable Income but leave current year Profit/(Loss) unchanged). This means that the Company may not have sufficient Franking Credits to pay out that portion of the Retain Earnings that is attributable to the bonus deduction as a Franked Dividend.