July 18, 2023 By Tony Madden

Take advantage of the 120% technology and skills ‘boost’ deduction

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The 120% skills and training, and technology costs deduction for small and medium business have passed Parliament. In this article, we’ll show you how to take maximise your deductions.


 

Remember that 120% tax break we were chatting about for SMEs investing in tech, skills, and staff training? Well, it's emerged from the legal labyrinth and is now officially a law, almost a year after the 2022-23 Federal Budget announcement!

Just a heads up though - there are some crucial timing factors to keep in mind - you need to have bought that shiny new tech and put it into use by the end of June 2023. That was just a short seven-day window from the moment the legislation got the green light from Parliament. Talk about cutting it close, right.

Who can access the boosts?

The 120% skills and training, and technology boosts are available to small business entities (individual sole traders, partnership, company or trading trust) with an aggregated annual turnover of less than $50 million. Aggregated turnover is the turnover of your business and that of your affiliates and connected entities.

$20k technology investment boost

Let's talk about the $20k Technology Investment Boost - a nifty little helper for small and medium businesses (SME) looking to boost their digital operations.

Starting from 7:30pm on the 29th of March, 2022 and running until the end of June 2023, it offered a bonus deduction on all things digital if they've been purchased and installed by the due date. Yes! That's right! This means if you bought say, 10 laptops, you not only have to buy them but also get them all set up and ready for action by 30 June 2023. 

But don't fret, there's a handy list of expenses that qualify for this technology boost:

  • Digital enabling items: Think of things like laptop, software, internet costs, or services that help run a computer network; they all count!

  • Digital media and marketing content: Your visual and audio content, or even webpage design, can be considered.

  • E-commerce solutions: This includes your fancy portable payment devices, digital inventory management, cloud-based subscriptions, or advice to upgrade your digital business operations.

  • Cyber security resources: Cybersecurity systems, backup management and monitoring services make the cut too.

Just remember; claiming your Christmas 2022 'work' drone won't work unless it's directly linked to your business operations. For example, it is deductible only if your business uses it to take aerial property images for your real estate website.

Even repair and maintenance costs can be claimed as long as they fit the eligibility criteria. And for the items which have a mix of personal and professional use, the bonus deduction will apply to the portion used for the business.

Get the picture? It's all about making sure those tech upgrades are working hard for your business. If you have any questions or need more guidance, don't hesitate to reach out. We're always here to help. Let's digitize and thrive together! 💻🚀

There are a few costs that the technology boost won’t cover such as costs relating to employing staff, raising capital, construction of business premises, and the cost of goods and services the business sells. The boost will not apply to:

  • Assets that you purchased but then sold within the relevant period (e.g., on or prior to 30 June 2023).
  • 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, that is, training staff on software or technology won’t qualify (see Skills and Training Boost).
  • Trading stock or the cost of trading stock.

Let’s look at the example of A Co Pty Ltd (A Co) that purchased multiple laptops on 15 July 2022 to help its employees to work from home. The total cost was $100,000. The laptops were delivered on 19 July 2022 and immediately issued to staff entirely for business use.

As the holder of the assets, A Co is entitled to claim a deduction for the depreciation of a capital expense. A Co can claim the cost of the laptops ($100,000) as a deduction under the temporary full expensing in its 2022-23 income tax return. It can also claim the maximum $20,000 bonus deduction in its 2022-23 income tax return.

The $20,000 bonus deduction is not paid to the business in cash but is used to offset against A Co’s assessable income. If the company is in a loss position, then the bonus deduction would increase the tax loss. The cash value to the business of the bonus deduction will depend on whether it generates a taxable profit or loss during the relevant year and the rate of tax that applies.

The good news for many eligible businesses is that your technology subscriptions and other products you use in your business might qualify for the boost.

The boost is claimed in your tax return with the extra 20% sitting on top your normal claim. That is, however the way the expense or asset is claimed (immediately or over time), the bonus 20% applies in the same way.

Get the picture? It's all about making sure those tech upgrades are working hard for your business. If you have any questions or need more guidance, don't hesitate to reach out. We're always here to help. Let's digitize and thrive together!

 

The Skills and Training Boost

Next, let's chat about something that can really amp up your business's future - The Skills and Training Boost. It's all about nurturing and developing your team's talent with a nice added bonus - a 120% tax deduction for external training. 

Imagine this. You hire an enthusiastic, less-experienced individual, and with the right training, transform them into a meticulously skilled team member boosting your productivity. Sounds like magic now, doesn't it?

Sadly, this cool tax break is just for employees, not sole traders, partners in a partnership, independent contractors, and other non-employees. Sorry, friends, but spouses, partners, or trustees of a trust can't tap into this one either.

Before we get too excited, let's step through the rules – they're not as tricky as they seem:

  • Time Frame: The clock started at 7:30 pm (AEST) on 29 March 2022 and runs right until 30 June 2024. Even if an employee started a course before the starting gunshot, any classes or courses enrolled after 29 March 2022 count.
  • Work-Related Training: The training must tie into your business, contributing to how you earn your income.
  • Charged by a Registered Training Provider: The provider must invoice your business directly (or indirectly) for the training. And nope, your training provider can't be your business or an associate.
  • For Employees, in Oz: Training is for employees of your business and must happen either in-person within Australia or online.

Expenditure on this training can cover incidental costs too, like textbooks or equipment. However, these costs are included only if the training provider bills your business for them.

Imagine you’re running a veterinary centre (we’ll call it Animals 4U Pty Ltd). You hire a new team member enthusiastic about upskilling. So, you invest $3,500 on external veterinary nursing training for this employee. With the Skills and Training Boost, you can claim a bonus deduction of 20% on this cost if it fits the eligibility criteria. In this case, you have $700 deducted from your taxable income. This doesn’t mean Uncle ATO writes you a $700 cheque, but it does mean you reduce your taxable income by this amount. So, if you have a positive business income and a 25% tax rate, you'd see a $175 cut in the tax bill.

Keep in mind, fewer franking credits may be generated, potentially affecting any dividends paid out to shareholders.

It's all about investing in your team and building a future-proof, highly skilled workforce. Remember, we've got your back. If you need any help navigating this boost, we're just a phone call or email away. To upskilling and beyond! 

 

What organisations can provide training for the boost?

Not all courses provided by training companies will qualify for the boost; only those charged by registered training providers within their registration. Typically, this is vocational training to learn a trade or courses that count towards a qualification rather than professional development.

Qualifying training providers will be registered by:

While some training you might want to have engaged might not be delivered by registered training organisations, there is still a lot out there, particularly the short-courses offered by universities, or the flexible courses designed for upskilling rather than as a degree qualification. If you have recently completed performance reviews for staff and training is part of their development pathway, it might be worth exploring.

It's all about investing in your team and building a future-proof, highly skilled workforce. Remember, we've got your back. If you need any help navigating this boost, we're just a phone call or email away. To upskilling and beyond!

About Author

Tony Madden

Tony is a director of Trekk and based in our Brisbane office. He works heavily in the advisory space for his clients, focusing on strategic management consulting, mentoring, and resource planning with a driver of making a difference in their businesses and lifestyle. Tony has key strengths in building teams and is an active listener in working to address the pain points in clients' businesses. He had a passion for small business from a young age due to being brought up with a family of business owners. He's worked with larger corporations and not-for-profits, but he's always drawn back to helping and supporting small to medium (SME) businesses. That's why he's a Director of Trekk, because supporting SME is something we are all passionate about here. Outside of work, Tony has an active family with three sons that love sports, music and socialising. He enjoys having a drink and some laughs with mates and working on restoring his old EH Holden. He’s a passionate Eels NRL and Reds Rugby supporter with a love of vintage and muscle cars, 80’s Rock and keen runner (for the mind & body), Tony also has a laugh by 'acting the goat' at any event where he can embarrass his kids.

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