Small business technology boost and training boost now enacted — what it means for 30 June 2023

The Treasury Laws Amendment (2022 Measures No. 4) Act 2023 passed both Houses of Parliament on Thursday 22 June 2023 and received Royal Assent on Friday 23 June 2023.

The Act introduces the technology investment boost and the skills and training boost for small businesses (with aggregated annual turnover of less than $50 million). Both boosts allow eligible businesses to claim a ‘bonus’ tax deduction equal to 20 per cent of qualifying expenditure. This article outlines how the rules for both boosts work, and the practical implications for this final week of the 2022–23 financial year.

The Act amends the Income Tax (Transitional Provisions) Act 1997 (ITTPA 1997).

The following table is a handy summary:

Table 1 Blog

Small business skills and training boost

The skills and training boost provides a bonus deduction for small businesses that incur eligible expenditure on external training for their employees between 7.30 pm (AEDT) on 29 March 2022 and 30 June 2024.

The bonus deduction is calculated as 20 per cent of the amount of expenditure that is both eligible for the bonus deduction and deductible under another taxation law provision.

Eligible entities

An entity will be eligible for the bonus deduction if, in the income year the expenditure is incurred, it is:

a ‘small business entity’ under s. 328-110 of the ITAA 1997 — i.e. an entity that carries on business with an aggregated annual turnover of less than $10 million
an entity that would meet the definition of an SBE under s. 328-110 of the ITAA 1997 if the reference to $10 million was replaced by a reference to $50 million.

Eligible expenditure

The bonus deduction will be calculated based on eligible incurred expenditure which meets the following criteria:

the expenditure must be for training employees, either in-person in Australia, or online
the expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope of the provider’s registration
the registered training provider must not be the small business or an associate of the small business
the expenditure must already be deductible under the taxation law
the expenditure must be incurred within a specified period — between 7.30 pm (by legal time in the ACT) on 29 March 2022 and 30 June 2024
the expenditure must be for the provision of training, where the enrolment or arrangement with the registered training provider for the provision of the training occurs at or after 7.30 pm (by legal time in the ACT) on 29 March 2022. That is, payment made for an invoice received within the eligible timeframe is not eligible if the training was delivered prior to that timeframe.

The Explanatory Memorandum notes that the cost of in-house or on-the-job training is not eligible expenditure for the purpose of the bonus deduction.

The training provider must be registered with at least one of the following government authorities: Australian Skills Quality Authority (ASQA) (within the meaning of the National Vocational Education and Training Regulator Act 2011); Tertiary Education Quality and Standards Agency (TEQSA) (within the meaning of the Tertiary Education Quality and Standards Agency Act 2011); Victorian Registration and Qualifications Authority (within the meaning of the Education and Training Reform Act 2006 (Vic)); or Training Accreditation Council of Western Australia (within the meaning of the Vocational Education and Training Act 1996 (WA)).

Expenditure for training persons other than employees is not eligible — i.e. the bonus deduction is not available for the training of non-employee business owners such as sole traders, partners in a partnership and independent contractors.

Relevant time periods

Table 2

Calculating and claiming the bonus deduction

The amount of the bonus deduction is calculated as 20 per cent of the total amount of eligible expenditure. Unlike the technology investment boost, there is no cap on the bonus dedduction.

Tax return disclosures

The ATO’s 2023 tax return stationery includes new disclosures for the skills and training boost:

Table 3

Summary of implications for 30 June 2023

The skills and training boost runs until 2023–24. An eligible entity will be able to claim the bonus deduction next year if they do not manage to incur the expenditure by 30 June 2023.

The expenditure may be incurred in a different year to the year in which the training is delivered. The bonus deduction is calculated in relation to the year in which the expenditure is incurred. There is no requirement that the training must have been delivered by the end of the income year in which the bonus deduction is claimed, i.e. if expenditure is incurred on 29 June 2023 but the training is provided on 3 July 2023, the boost is deductible in 2022–23. However the boost cannot be claimed where the training was provided before 7.30 pm (by legal time in the ACT) on 29 March 2022 even if the expenditure was not incurred until after that time.

The bonus deduction has no effect on the year in which the expenditure is deductible under another provision of the law. For example, a deduction under s. 8-1 may be claimable in 2021–22 while the boost is claimed in 2022–23.

If an eligible entity incurred qualifying expenditure in 2021–22, there is no need to amend the 2021–22 tax return — the bonus deduction is only to be claimed in the 2022–23 tax return.

Table 4

Table 5

Small business technology investment boost

The technology investment boost provides eligible businesses with access to a bonus deduction equal to 20 per cent of their eligible expenditure incurred on expenses and depreciating assets for the purposes of their digital operations or digitising their operations between 7.30 pm (AEDT) on 29 March 2022 and 30 June 2023.

To be eligible for the bonus deduction:

the expenditure must be eligible for a deduction under another provision of the taxation law
the expenditure must be incurred between 7.30 pm (by legal time in the ACT) on 29 March 2022 and 30 June 2023
if the expenditure is on a depreciating asset — the asset must be first used or installed ready for use by 30 June 2023.

In respect of each of the 2021–22 and 2022–23 income years, eligible businesses may claim a bonus deduction equal to the lower of:

20 per cent of eligible expenditure incurred in that income year
$20,000.