As part of the Australian Government’s Digital Economy Strategy, $1 billion is being provided to support small businesses digitalise their operations with a new bonus tax deduction. SMBs with an aggregated turnover below $50 million per annum will be able to deduct an additional 20 percent of the cost incurred on business expenses and depreciating assets that supports their digitalisation. So, for every $100 a business spends on digital economy technologies such as flexible work solutions, cyber security, cloud adoption, e-commerce, or new software services, they get a $120 tax deduction.

This is a huge win for SMBs as it will help fund their digital transformation for the future. And yet most business owners are unaware of the current digitalisation incentives, whether it applies to them or how they can benefit. As the tax incentive is only available until 30 June 2023, it is simply a wasted opportunity for businesses not to capitalise on the investment boost being offered. It’s time to conduct a full business analysis, identify key areas which would benefit from digitalisation, prioritise those needs and, importantly ensure the right technology partners are selected to achieve the best possible outcomes.

An annual $100,000 cap will apply to each qualifying income year. Businesses can continue to deduct expenditure over $100,000 under existing law.  This measure will apply to expenditure incurred in the period commencing from 7:30 pm AEDT 29 March 2022 until 30 June 2023.

For eligible expenditure incurred between 7:30 pm AEDT 29 March 2022 until 30 June 2022:

• claim the expenditure as usual in your 2021–22 tax return, and
• claim the additional 20% bonus deduction for this period in your 2022–23 tax return.

For eligible expenditure incurred from 1 July 2022 until 30 June 2023:

• you can deduct the entire 120% in your 2022–23 tax return.

Small Business Skills and Training Boost

Small businesses with an aggregated annual turnover of less than $50 million will be able to deduct an additional 20% of expenditure incurred on eligible training courses provided to employees.

Businesses may continue to deduct expenditure that is ineligible for the bonus deduction in accordance with the existing tax law.

This measure will apply to expenditure incurred in the period commencing from 7:30 pm AEDT 29 March 2022 until 30 June 2024.

The bonus deduction (the additional 20%) for expenditure incurred from 30 March 2022 until 30 June 2022 will be included in the following income year, 2022–23.

The bonus deduction for expenditure incurred from 1 July 2022 until 30 June 2024 will be included in the income year in which the expenditure was incurred.

For further information and assistance get in touch with Sumz Plus Business Services.