Small Business Technology Investment Boost

Small Business Technology Investment Boost

Great news for those who are looking for additional tax deductions for their small business prior to 30 June. The “Small Business Technology Investment Boost” bill has been passed on late last week.

About the boost

It provides small and medium business entities (with aggregated turnover of less than $ 50 million) with a 20% bonus deduction for eligible expenditure incurred to support their digital operation and digitise their operations. The eligible expenses need to be incurred between 30 Mar 2022 & 30 June 2023. It is only for eligible business expenses and depreciating assets, and is capped at $ 100,000 of expenditure per income year (i.e., a max of $ 20,000 additional deductions per income year)

Eligible expenditure

Eligible expenditure may include, but is not limited to, business expenditure on:

• digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, 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.

Where the expense is partly for private purposes, the bonus deduction can only be applied to the business-related portion.

Certain types of expenditure are specifically excluded from the Technology Investment Boost even where it would otherwise meet the eligibility requirements.

This exclusion broadly applies on the basis that certain expenditure is not directly related to digital operations or digitising operations. Specifically, the following costs are treated as excluded expenditure, and are therefore ineligible for the Technology Investment Boost:

• Salary or wage costs.
• Capital works costs (i.e., which can be deducted under Division 43 of the ITAA 1997).
• Financing costs.
• Training and education costs
• Expenditure that forms part of, or is included in, the cost of trading stock

Depreciation Assets

A small or medium business may potentially claim the 20% bonus deduction under the Technology Investment Boost for eligible expenditure incurred in relation to a depreciating asset. This is on the basis that the depreciating asset is to be used wholly or substantially for the purpose of the taxpayer’s digital operations or digitising the taxpayer’s operations.

Please note that 20% additional deduction on eligible depreciating assets will only be available if:

• The asset is ready for use by 30 June 2023 and
• It is not sold before the end of the income year in which the expenditure was incurred

If you think that the current year (YTD) eligible expenses (as per the above) for your small business is less than $ 100,000, and that your business will be benefited from this, you may want to review and identify your expenses, and bring forward any of those expenses to this FY (before 30 June) as this is a ONE-OFF tax deduction boost.

Should you decide to prepay any of the eligible expenses, please note that you can only prepay any expenses up to 12 months.

Please contact our office if you are unsure if certain expense is an eligible expense, or if you are uncertain if you should take advantage of this tax boost.

Disclaimer: This article is for informational purposes only and should not be considered as financial or legal advice. Please consult with a qualified professional for advice specific to your circumstances.