This boost allows provide small businesses (with aggregated annual turnover of less than $50 million) a bonus deduction equal to 20% of their eligible expenditure incurred on expenses and depreciating assets for the purposes of their digital operations or digitising their operations.
The bonus deduction applies to eligible expenditure incurred between 7:30pm on 29 March 2022 and 30 June 2023, so it will be a year end tax planning issue this year.
It applies to the total of eligible expenditure of up to $100,000 per income year or specified time period, up to a maximum bonus deduction of $20,000 per income year. This will decrease tax payable by $5,000 for a base rate entity company, but will also create a potential unfranked dividend in the company.
Any expenditure must be incurred wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations and may include expenditure on:
1. digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;
2. digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and
3. e-commerce – supporting digitally ordered or platform enabled online transactions.
However it cannot include salary and wage costs, capital works costs which can be deducted under Division 43 , financing costs, training and education costs, and expenditure that forms part of, or is included in, the cost of trading
And to show how broadly this applies have a look at this example:
A Co Pty Ltd (A Co) is a small business entity. On 15 July 2022, A Co purchased multiple laptops to allow its employees to work from home. The total cost was $100,000 (GST-exclusive). 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.Example 1.1 Claiming the bonus deduction for a depreciating asset where Temporary Full Expensing applies
A Co can claim the full purchase price of the laptops ($100,000) as a deduction under 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.
This boost will allow small businesses (with aggregated annual turnover of less than $50 million) access to a bonus deduction equal to 20% of eligible expenditure incurred on external training provided to their employees.
This bonus deduction is available for eligible expenditure incurred between 7:30pm on 29 March 2022 and 30 June 2024. ONE YEAR LONGER THAN THE BOOST ABOVE…
But any bonus deduction is only available if:
1. The expenditure must be for training employees, either in-person in Australia, or online;
2. The expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope (if any) of the provider’s registration;
3. The registered training provider must not be the small business or an associate of the small business;
4. The expenditure must already be deductible under the taxation law;
5. The expenditure must be incurred between 7.30pm on 29 March 2022 and 30 June 2024; and
6. The expenditure must be for the provision of training, where the enrolment or arrangement for the provision of the training occurs at or after 7.30pm on 29 March 2022.
So the fact it must be a registered training provider is a massive limitation on who can claim these additional deductions.
If you go out and buy computers or training from an RTA just for the boosts, then don’t bother. Spend $100 extra, get a +20% deduction, which multiplied by your tax rate means a saving of between $5-$9 ($5 for base rate entities and ~$9 for high wealth individuals).
But if you were already going to spend money on digital stuff or training from an RTA, remember to make the claims and get the 5-9% of your costs back on tax. and if you are going to buy digital stuff soon you can consider doing it before 30 June 2023 to get the extra 5-9% back.