Bonus deduction available for technology investment
A bonus deduction may be available in this upcoming tax return for expenses relating to undertaking a digital adoption for your business.
This bonus deduction is 20% of the costs you’ve incurred to support a digital adoption, including but not limited to:
Digital enabling items such as computer hardware and software, systems, and services that form and facilitate the use of a computer network.
Digital media and marketing such as audio and visual content that can be created, accessed, stored, and viewed on digital services, and e-commerce items that support digital payment systems and online transactions.
The bonus deduction is capped at $20,000 per year, being 20% of $100,000 in costs. This bonus deduction is, however, on top of the actual deduction that you’ll be able to claim for the items used in your business. The actual deduction may be an outright tax deduction due to the temporary full expensing rules that are currently in place.
Any eligible costs incurred from 7:30 pm (AEDT) on 29 March 2022 to 30 June 2023 are included.
In June 2023, this measure became law.
What you need to do
We will need to scrutinse your deductions for all digital upgrades over the past 15 months to ensure that we are getting that full bonus deduction. When you send in your year-end tax work and accounting file, make sure you attach all the invoices that you think will be eligible for this bonus deduction. To begin with, that would include all your new purchases listed within the 3 items above.
Along with this, we will also review your files and make sure that we see a copy of any invoices that we think are also eligible for the bonus deduction.
Bonus deduction available for staff training
Businesses with an aggregated turnover of less than $50 million are entitled to a bonus tax deduction of 20% for eligible external training costs for staff. It is available for expenses you have incurred on staff training between 29 March 2022 and 30 June 2024.
To claim a bonus deduction for training Expenses incurred before 30 June 2022, you will need to wait until you lodge your 2022–23 income tax return.
Eligible expenditure refers to external training courses delivered to a business’s employees by a registered training organisation in Australia.
To qualify for the bonus deduction, you will need to engage an external training organisation that is registered in Australia to complete the training. You will not get the additional deduction for on-the-job or in-house training costs.
In order for your business to claim a tax deduction under ITAA 1997 s 8-1, you are required to show that the expenditure is necessarily incurred in carrying on a business for the purpose of gaining or producing assessable income.
The bonus deduction is available for your employees only. If you are a sole trader or partner in a partnership, you can only make a tax deductions claim under the self-education expenses of your individual tax return. Your associates and independent contractors are specifically excluded from the eligibility criteria.
Training a new employee who requires upskilling for their new role is also eligible for the bonus deduction.
How to claim the bonus deduction?
You can claim the bonus deduction in your 2022–23 income tax return and subsequent income years, however, if you provided any external staff training to employees in the 2021–22 income year you will not be able to receive the 20% bonus deduction until lodging the 2022–23 income tax.
If you have any questions relating to either bonus, please contact our office. We would be delighted to assist you further.