As part of the 2022-23 Budget, the government introduced the Small Business Technology Investment Boost. Small businesses (with an aggregated annual turnover of less than $50 million) are able to deduct an additional 20% of expenditure that is incurred to support their digital operations and digitise their operations.
The boost applies to eligible expenditure incurred from 7.30pm 29 March 2022 until 30 June 2023.
The boost is for business expenses and depreciating assets and is capped at $100,000 in expenditure per income year. The maximum bonus deduction is $20,000 per income year. A maximum bonus deduction of up to $40,000 may be claimed. This incentive is ideal for businesses that are looking to digitise their operations during the designated time period.
Eligible Expenditure
Eligible expenditure includes but is not limited to:
- Digital enabling items
- Digital media and marketing
- E-commerce initialisation and maintenance
- Cyber Security
However, the wage costs and other financing costs of digitising the business do not fall under eligible expenditure and are specifically excluded. As the legislation did not receive royal assent till after the end of the financial year there was little ability to maximise this incentive. Although businesses may already pay for certain expenses that fall within the eligible criteria, this can be utilised to claim an additional 20%.
This technology boost is an additional tax deduction and not a tax rebate. The immediate impact of the additional deduction is to reduce your overall taxable income and in effect the amount of tax payable. It is important to note that the overall tax deduction that can be claimed is $40,000 if both financial years have been maximised at $100,000 of eligible expenditure. The resulting tax saving would correspond to the marginal tax rate of the relevant taxpayer.
Record Keeping
The Australian Taxation Office (ATO) expects business to keep an explanation of how items relate to digitising the business. It is also expected that the business would have accurate receipts and invoices to support the overall claim.
Keeping track of the accounts that have been used within an online accounting software will also help reduce the overall compliance cost of claiming this deduction. However, it is important to consider whether the time incurred after the end of the financial year adds value and not additional costs.
The best method to take full advantage of this incentive is to identify which expenses are specifically used to digitise your business and keep appropriate records.
For More Information
For more information on the Small Business Technology Investment Boost or for assistance with supporting documentation, contact your Archer Gowland Redshaw adviser on (07) 3002 2699 | info@agredshaw.com.au.
