Business Update

Technology investment boost

By James Moore, Manager

29 June 2023

What is the boost?

Small businesses with annual turnover less than $50 million, will be entitled to a bonus 20% tax deduction on eligible expenditure incurred on business expenses and depreciating assets that support their digital operations. 

The boost applies to expenditure from 7.30pm 29 March 2022 until 30 June 2023. 

An annual cap of $100,000 of expenditure applies. Therefore, the maximum bonus deduction is $20,000 per income year (20% of $100,000). As the bonus deduction is available in 2 financial years, an overall maximum bonus deduction of $40,000 is available. 

What is it aimed to do?

Encourage small businesses to invest in digital technology and digitalise their business operations. 

Qualifying Expenditure

Expenditure must support a small business’s ability to transition to a digital business. Items which may be eligible for the technology investment boost include

• Computer hardware and equipment
• Computer networks
• Software (that is not developed in-house)
• Repairs to the software
• E-commerce platforms
• Cyber security systems
• Digital media and marketing
• Portable payment devices
• Design or upgrade of website
• Telecommunication hardware/equipment
• Subscription to cloud services
• Digital tracking for livestock or other inventory

The expenditure must be ordinarily deductible under the taxation law. Bonus deduction will be calculated on GST-exclusive amount of expenditure if the business is registered for GST.

Where some of the expense is private, the bonus deduction will need to be apportioned.

In respect of a depreciating asset, the bonus deduction is calculated based on the asset’s cost (regardless of depreciation method). An entity cannot claim the bonus deduction for expenditure on a depreciating asset if it sells the asset within the relevant time period.

If the expenditure is on a depreciating asset, the asset must be first used, or installed ready for use, before 1 July 2023.

Excluded Expenditure

• Salary and wage costs
• Capital works costs
• Financing and interest costs
• Training or education costs (see Skills & Training Boost)
• Trading stock costs
  

Example 1 

On 1 April 2022, a small business entity pays $2,000 (GST-exclusive) annual subscription to a cloud service to store client and sales data.

On 2 April 2023, they renew their subscription for an additional $2,200 (GST-exclusive).

In their 2021-22 tax return, they will claim a deduction for $2,000 under the general deduction provisions.

In their 2022-23 tax return, they will claim a total deduction of $3,040 calculated as follows:

Example 2

On 29 June 2022, a small business entity purchases multiple laptops to allow its employees to work from home. The cost was $100,000 (GST-exclusive). 

The laptops were delivered on 2 July 2022 and were issued to staff.

In their 2021-22 tax return, no deduction will be allowed as the laptops were not yet delivered and ready for use until the next financial year.

In their 2022-23 tax return, the business can claim a deduction for the depreciation of the laptops. Under temporary full expensing, the business can claim the full purchase price of the laptops , as well as a 20% bonus deduction. The total deduction will be $120,000.

How do I get it?

Any expenditure incurred in the 2021–22 income year will not get the bonus deduction until you lodge your 2022–23 income tax return. 

Closing comment

Should you have any queries regarding this measure, please contact our office for more information.

Discuss Further?

If you would like to discuss, please get in touch.