Potential new 20% tax deduction announced for technology investments for SMBs
28 Jun 2022, by Slade Baylis
One of the purposes of our newsletter is to help keep our clients updated on developments in the technology space - whether its services they can benefit from, new technology that becomes available, or other ways they can help empower their own businesses. That’s why we thought we’d let you know that there is a potential new tax deduction that you might be able to take advantage of in the new financial year.
Earlier this year the Federal Government announced that it would try to help support small businesses through two new tax deductions, one focused on boosting digital adoption and the other on boosting skills and training amongst employees. As part of the 2022-2023 budget, the new plan aims to deliver up to $1.6 billion in tax relief to the more than 3.6 million small businesses throughout Australia. That relief would come in the form of a bonus 20 percent deduction that’s available to claim against expenses incurred in expanding digital presence as well as upskilling staff.
It’s worth noting though, with nothing in life being guaranteed except death and taxes, unfortunately these tax deductions aren’t yet guaranteed - as they are not yet law and will be subject to decisions from the new Government.
Small Business Technology Investment Boost & Small Business Skills and Training Boost
The first planned deduction – called the Small Business Technology Investment Boost - is aimed at supporting digital adoption. This is planned to be achieved through an additional 20 percent tax deduction on business expenses related to supporting digital adoption. Eligible expenditure has been said to include items such as portable payment devices, cyber security systems and subscriptions to cloud-based services - however the full list of eligible expenses would likely be much larger, including a wide range of services and products used to support digital adoption.
The measure would apply to expenditure incurred from 7:30pm AEDT on the 29th of March 2022 until the 30th of June 2023 and would be capped at $100,000 of expenditure per year.
The second planned deduction - called the Small Business Skills and Training Boost - is aimed at supporting businesses in training and upskilling their employees. It would allow small businesses to deduct an additional 20 percent of the expenditure incurred on eligible training courses provided to employees.
This too would apply to expenditure incurred from 7:30pm AEDT on the 29th of March 2022 until the 30th of June 2023. However, unlike the Small Business Technology Investment Boost, there wouldn’t be a limit to the amount of expenditure claimed under this deduction, though there are limitations on what can be claimed. For example, the 20 percent training tax deduction would only apply to external training courses for employees, meaning in-house or on the job training programs would not be eligible.
As noted earlier, these packages are not yet law and are subject to decisions from the new Government – so with that being the case, we don’t suggest rushing out on a spending spree just yet!
Ways to benefit from the Small Business Technology Investment Boost
Should the plans become part of the budget, the next question is how best can our customers leverage it to help grow their businesses? As it is aimed at digital adoption, it’s likely that there are quite a wide range of ways you could use the Technology Investment Boost to your advantage.
The Small Business Technology Investment Boost deduction would cover business expenses as well as depreciating assets that support digital adoption - meaning it could be used to offset some of the costs involved in purchasing new hardware for your infrastructure. With hardware costs increasing dramatically due to supply chain issues, shortages, and inflation - this could help offset some of that increase.
For our clients who don’t utilise their own hardware but instead rely on the Micron21 Cloud, there are ways that they can benefit too. As mentioned earlier, the scheme would allow small businesses to claim items such as subscriptions to cloud-based services, meaning that the various cloud-based services we provide – such as website and email hosting, VPS (Virtual Private Server), or VCS (Virtual Cloud Server) services - would likely fall into that bracket.
As is usually the case when it comes to financial decisions, we recommend that you check with your accountant before making any purchases with the plan of deducting it under this new plan once it is law. They will be able to confirm that the service or hardware you’re planning on purchasing would in fact be covered and deductable.
Is there anything else I should be aware of?
The government has been offering a lot of support for business post-pandemic, trying to help businesses recover – that’s why we recommend everyone check out the different grants and programs that are available using the site below.
https://business.gov.au/grants-and-programs
It’s likely that we’ll hear more about these planned deductions in the not-to-distant future from the new Treasurer Jim Chalmers - either way, when more information is released we’ll be sure to let you know!
Need to expand and grow your own digital footprint?
If you are looking to grow your online presence, please let us know! You can call us on 1300 769 972 (Option #1) or email us at sales@micron21.com and we’d be more than happy to answer any questions that you may have and help you choose the right options for your business.
Sources:
1 Small Business Technology Investment Boost and Small Business Skills and Training Boost, <https://www.ato.gov.au/General/New-legislation/In-detail/Direct-taxes/Income-tax-for-businesses/Small-Business-Technology-Investment-Boost-and-Small-Business-Skills-and-Training-Boost/>
2 Small businesses offered bonus tax deductions on technology and training in federal budget <https://www.theguardian.com/australia-news/2022/mar/29/australia-federal-budget-2022-small-business-technology-training-boost>