The 120% deduction for skills training and technology costs
It was one of the headline grabs of the 2022 Federal Budget: Small businesses could spend $100 and claim a $120 tax deduction on skills and training for their staff. However with the change of government and the announcement not yet law, where does that leave SMEs?
It didn’t take long for the emails to arrive to the inboxes of small business owners encouraging them to take advantage of the Skills and Training Boost to benefit from a 120% deduction for expenditure on training and technology costs.
As the incoming government starts to take shape, what’s not yet clear is whether the Albanese Government will support the measure and there is not yet any draft legislation or detail to determine its practical application.
What was in the Federal Budget announcement?
The 2022-23 Federal Budget announced two ‘Investment Boosts’ available to small businesses with an aggregated annual turnover of less than $50 million. The Skills and Training Boost is intended to apply to expenditure from Budget night, 29 March 2022 until 30 June 2024.
The business, however, will not be able to claim the deduction until the 2023 tax return. That is, for expenditure between 29 March 2022 and 30 June 2022, the boost, the additional 20%, will not be claimable until the 2022-23 tax return, assuming the announced start dates are maintained if and when the legislation passes Parliament.
The Technology Investment Boost is intended to apply to expenditure from Budget night, 29 March 2022 until 30 June 2023. As with the Skills and Training Boost, the additional 20% deduction for eligible expenditure incurred by 30 June 2022 will be claimed in the 2023 tax return.
The boost for eligible expenditure incurred on or after 1 July 2022 will be included in the income year in which the expenditure is incurred.
Technology Investment Boost
A 120% tax deduction for expenditure incurred by small businesses on business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems, or subscriptions to cloud-based services, capped at $100,000 per annum.
We have received a lot of questions about the specific expenditure the boost might apply to, for example does it cover website development or SEO services?
However, until the details are released or draft legislation is available, it’s very much a case of ‘watch this space.’
Skills and Training Boost
A 120% tax deduction for expenditure incurred by small businesses on external training courses provided to employees. External training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.
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.
We are waiting on further details of this initiative to be released to confirm whether there will need to be a nexus between the training program and the current employment activities of the employees undertaking the course.
Again, until we have something more than the announcement, it’s not possible to confirm how the measure will apply in practice or how broad (or otherwise) the definition of skills training is.
What happens if I have already spent money on training and technology in anticipation of the bolstered deduction?
If the measure becomes law, and the start date of the measure remains the same, we expect that any qualifying expenditure incurred in the 2021-22 financial year will be claimed in your tax return. But, the ‘boost’, the extra 20% will not be claimable until the 2022-23 financial year.
If the measure does not come to fruition, you should be able to claim a deduction under normal rules for the actual business expense.
Stay in the loop
For more information, please speak to your accountant on 02 9957 4033 and keep your eye out for future Client Updates from our team.