Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 was introduced into Parliament yesterday. The Bill contains the requirements for the deduction boosts announced in the March 2022 Federal Budget aimed towards small and medium businesses. Small and medium businesses include businesses with an aggregated turnover of less than $50 million. Eligible businesses will be able to claim an extra 20% deduction on certain expenditure towards either external training or investment in technology (i.e. spend $100 and claim $120 as a tax deduction).
TECHNOLOGY INVESTMENT BOOST
The deduction boost for technology investment is applicable from 29 March 2022 – 30 June 2023 and can be claimed towards costs incurred by businesses for eligible expenditure which supports businesses to take advantage of digital technologies. The maximum bonus deduction is capped at $20,000 per income year. In effect the total expenditure eligible for the boost during a particular year is $100,000.
Expenditure on digital operations or digitising operations may include business expenditure on:
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Digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, and systems and services that form and facilitate the use of computer networks;
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Digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
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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
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Cyber security – cyber security systems, backup management and monitoring services.
Expenditure on salary and wages, financial costs, capital works are amongst a few that are ineligible for the boost.
EXTERNAL TRAINING
The deduction boost for training is applicable from 29 March 2022 – 30 June 2024 and can be claimed towards costs incurred by businesses for eligible expenditure on external training for their employees. The training boost is not capped.
In order for training expenditure to be eligible, the training provider must be a registered training provider. The training provider must be registered at the time the expenditure is incurred with at least one of the following four government authorities:
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Tertiary Education Quality and Standards Agency (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011);
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Australian Skills Quality Authority (ASQA) (within the meaning of the National Vocational Education and Training Regulator Act 2011);
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Victorian Registration and Qualifications Authority (within the meaning of the Education and Training Reform Act 2006 (Vic)); or
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Training Accreditation Council of Western Australia (within the meaning of the Vocational Education and Training Act 1996 (WA)).
An example of how the boost works is below:
Animals 4U Pty Ltd is a small business entity that operates a veterinary centre. The business recently took on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse. The business pays $3,500 for the employee to undertake external training in veterinary nursing. The training meets the requirements of a GST-free supply of education. The training is delivered by a registered training provider, whose scope of registration includes veterinary nursing.
The bonus deduction is calculated as 20% of 100% of the amount of expenditure that can be deducted under another provision of the taxation law. In this case, the full $3,500 is deductible under section 8-1 of the ITAA 1997 as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700. |
Since this legislation has retrospective effect, the deduction boost (extra 20% deduction) on any eligible expenses incurred between 29 March 2022 – 30 June 2022 (2022 income year) can be claimed when an entity lodges it’s 2023 income tax return.
MORE INFORMATION
If you would like to find out more, or need any assistance, please contact your local Moore Australia advisor.