Post 13 – Tilley Accountants

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The Government has reinvigorated the 120% skills training and technology costs deduction for small and medium business

An election ago, the 2022-23 Budget proposed a 120% tax deduction for expenditure by small and medium businesses on technology, or skills and training for their staff. This proposal has now been adopted by the current Government and details released in recent exposure draft by Treasury.

The Technology Investment Boost is a 120% tax deduction for expenditure incurred on business expenses and depreciating assets that support digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services. The boost is capped at $100,000 per income year with a maximum deduction of $20,000.

To be eligible, the expenditure must be wholly or substantially for the entity’s digital operations or digitising its operations. For example:

• digital enabling items – computer and telecommunications hardware and equipment, software, 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; and

• e-commerce – supporting digitally ordered or platform enabled online transactions.

Repair and maintenance costs can be claimed as long as the expenses meet the eligibility criteria.

Where the expenditure has mixed use (i.e., partly private), the bonus deduction applies to the proportion of the expenditure that is for an assessable income producing purpose. The bonus deduction is not intended to cover general operating costs relating to employing staff, raising capital, the construction of the business premises, and the cost of goods and services the business sells. The boost will not apply to:

• Assets that are sold while the boost is available

• Capital works costs (for example, improvements to a building used as business premises)

• Financing costs such as interest expenses

• Salary or wage costs

• Training or education costs

• Trading stock or the cost of trading stock .

The Skills and Training boost is a 120% tax deduction for expenditure incurred on external training courses provided to employees. External training courses will need to be provided to employees in Australia or online, and delivered by training organisations registered in Australia. Only the amount charged by the training organisation is deductible. In some circumstances, this might include incidental costs such as manuals and books, but only if charged by the training organisation.Some exclusions will apply, such as for in-house or on-the-job training and expenditure on external training courses for persons other than employees.

The training boost is not available to:

• Sole traders, partners in a partnership, or independent contractors (who are not employees)

• Associates of the business such as a relative, spouse or partner of an entity or person, a trustee of a trust that benefits an entity or person and a company that is sufficiently influenced by an entity or person.