Earlier this year, it was announced that small businesses would be supported by the Small Business Technology Boost. Exposure draft legislation is currently in place. This was announced by the then government in March 2022, as part of the 2022/23 budget.
The proposed Technology Investment Boost will allow small businesses (with aggregated annual turnover of less than $50 million) to deduct an additional 20 per cent of eligible expenditure incurred between 29 March 2022 to 30 June 2023.
Even though the legislation is not law yet, it is important small businesses understand the draft legislation because it will apply to expenditure incurred since 29 March 2022. Small businesses need to be able to identify eligible expenditure that may qualify for the bonus deduction.
The eligible expenditure must have a direct link to the entity’s digital operations for its business, including but not limited to business expenditure on:
- Digital enabling items – depreciating assets that support digital adoption, such as portable payment devices and computer hardware and equipment, cyber security systems, subscriptions to cloud based services;
- Digital media and marketing; and,
- Digitising operations – e-commerce.
For eligible expenditure on a depreciating asset – the asset must be first used or ready for use by 30 June 2023, and the entity must hold the asset during the relevant period. This means that the bonus deduction will not be available if the business or entity sells the asset within the relevant period. Repairs and improvement costs for depreciating assets will also be eligible.
Specific expenditure has been excluded from the boost and includes but is not limited to salary or wage costs, capital works (Division 43), financing costs, training or education costs, and expenditure that is part of trading stock.
How much can be claimed and when
An annual $100,000 cap on expenditure will apply to each qualifying income year (2022 and 2023), with the bonus deduction capped at $20,000 per year. This means that a maximum of $40,000 will be able to be claimed as an additional deduction.
The bonus deduction will be claimed through the 2023 tax return only. No bonus deduction is made in the 2022 tax return.
As at the time of publishing this article, the legislation has not yet become law, we recommend you discuss your planned expenditure and eligibility for the increased deductions with your Accru representative.