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Skills Training and Technology Boosts: What You Need to Know About the Upcoming 120% Tax Deduction
The idea sounds fantastic, doesn’t it? Spend $100 on skills training or technology, and get a $120 tax deduction. Just days after the 2022-23 Federal Budget announcement, businesses began receiving marketing emails urging them to act fast to take advantage of this potential windfall. However, while the offer appears enticing, there are several factors that need to be considered before diving in.
Is the Announcement Law Yet?
The first important point to note is that the 120% deduction for skills training and technology is currently just an announcement — not yet law. Given the current caretaker mode of the Government ahead of the Federal election, the future of this measure is uncertain, as we do not know where the incoming Government stands on this tax incentive. Even if the incoming Government decides to support it, the measure is still in its infancy, with no draft legislation or practical details available at this time.
What Was Announced?
In the 2022-23 Federal Budget, two “Investment Boosts” were proposed for small businesses with an aggregated annual turnover of less than $50 million. These boosts aim to provide businesses with significant incentives to invest in skills training and technology. However, there are important timelines and rules to be aware of:
Skills and Training Boost
The Skills Training Boost would apply to eligible expenditure on external skills training courses provided to employees. This initiative is designed to encourage small businesses to invest in upskilling their workforce. The announcement indicated that businesses could claim a 120% tax deduction for such expenditures, but here’s the catch — the additional 20% will not be claimable until the 2023 tax return, even though the boost applies to expenditure from Budget night (29 March 2022) until 30 June 2024.
It’s crucial to note that only external skills training courses that are provided by registered entities in Australia (or online) qualify for this boost. Skills training programs must be aimed at improving employees’ skills, and training that is conducted in-house or as part of on-the-job learning may not be eligible.
However, as of now, the specifics are still unclear. For example, will there need to be a clear link between the skills training provided and the current employment activities of the employees? Until the legislation is finalized, businesses are advised to remain cautious and wait for further details.
Technology Investment Boost
The Technology Investment Boost focuses on helping small businesses with their digital transformation. Expenditures eligible for this 120% tax deduction include items such as portable payment devices, cybersecurity systems, and subscriptions to cloud-based services. This boost, also effective from 29 March 2022, applies to expenditures incurred until 30 June 2023. For qualifying expenses incurred on or after 1 July 2022, businesses can claim the boost in the income year when the expenditure occurs.
Like the Skills Training Boost, the specifics of what qualifies under the Technology Investment Boost remain vague. Many businesses have questioned whether website development or SEO services will be eligible expenses, but until the draft legislation is revealed, nothing is certain.
What Happens If I’ve Already Spent Money in Anticipation of the Boost?
If the measure is passed into law as announced, and the start dates remain unchanged, businesses that have already incurred qualifying expenses in the 2021-22 financial year will be able to claim a deduction for those expenses on their tax return. However, the additional 20% “boost” will not be available until the 2022-23 financial year.
If, for any reason, the measure does not proceed or is delayed, businesses will still be able to claim deductions under the normal rules for business expenses. This means that even without the boost, your expenditure on training and technology could still be tax-deductible.
The Bottom Line
While the Skills and Training Boost and Technology Investment Boost appear to offer valuable opportunities for businesses to reduce their tax liability, there are still several unknowns. The measure is not yet law, and we are awaiting further details on how it will be practically implemented. Therefore, it’s essential for business owners to stay informed and seek professional advice before making any decisions based on the announcement.
If you’ve already incurred expenses in anticipation of this measure, you’ll likely be able to claim a deduction in the future, but the “boost” itself will not be available until the 2022-23 tax year. Always ensure you’re acting on the latest information and seek guidance from a qualified accountant or financial adviser to ensure you’re making the most of these potential deductions when they become available.
