What is the Small Business Technology Investment Boost?
The Small Business Technology Investment Boost by the ATO, is a tax incentive program designed to provide financial support to small businesses seeking to invest in technology to improve their operations and productivity. The scheme allows eligible businesses to claim an additional 20% tax deduction for technology-based expenses up to a threshold.
Eligibility For The Technology Investment Boost
For an entity to be eligible for the boost it must be “carrying on a business” with an aggregated annual turnover of less than $50 million. The boost can apply to sole traders, partnerships, companies, and trusts.
Business expenses that have a close connection with the entity’s digital operations or digitising its operations are eligible for the bonus deduction. As the legislation is very broad in its definition a large variety of expenses may be eligible.
- Eligible Expenditure must be incurred between 7:30pm AEDT 29 March 2022 and 30 June 2023.
- If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use for taxable purpose by 30 June 2023.
- Digital Enabling Items – computer and telecommunications hardware and equipment, software (such as Xero or MYOB subscriptions), internet costs, systems and services that form and facilitate the use of computer networks.
- Digital Media & Marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design.
- E-Commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth.
- Cyber Security – cyber security systems, backup management and monitoring services.
- Expenses eligible for the boost can also apply to depreciation on assets that relate to digital operations, such as computer equipment.
- Many small businesses have been utilising Temporary Full Expensing depreciation rules over the last few years, allowing them to immediately claim full depreciation on assets. As such, many of the assets purchased before the boost started (29 March 2022) will not be eligible for the bonus deduction as they have already been fully depreciated. However, Temporary Full Expensing will also allow for eligible new assets purchased and “ready for use” during the boost’s eligible period to be immediately depreciated and the bonus boost deduction to be calculated on the full depreciable value.
What You Can’t Claim As Part of the Technology Investment Boost
- Salary & Wages
- Phone Expenses
- Capital Works Costs
- Financing Costs
- Training or Education Costs (they may be eligible for the Small Business Skills and Training Boost)
- Expenses that form part of your trading stock costs
How to Claim The Tax Deduction
The bonus deduction for the boost will be taken up by us as a tax adjustment when we prepare the 2023 Income Tax Returns. The 2023 Income Tax Returns will include the tax adjustment for eligible expenses incurred during the 2023 financial year, as well as eligible expenses incurred during the eligible period within the 2022 financial year (29 March 2022 to 30 June 2022).
The boost is capped at $100,000 of expenditure per income year, resulting in a bonus deduction of $20,000. Therefore, since the eligible period covers one full financial year (2023) and part of another financial year (2022), the total bonus deduction claimable is $40,000.
What You Need to Do
- If we have already prepared your 2023 Tax Return, we have already included the boost in your returns if you are eligible.
- Ensure expense information provided to us has sufficient details so we can identify what they relate to. Where possible also attach tax invoices in your bookkeeping software.
- Ensure single payments for multiple goods and services that include eligible and non-eligible expenses are recorded as separate amounts.
- Separate out internet costs from phone costs so the internet can be included in the boost.
- Separate out any private portion of expenditure, in particular technology expenses.
- Email or call your MGI contact if you have any questions.
FAQ’s about the Small Business Technology Investment Boost
- Does the boost only apply to new technologies, or also existing technologies?
Although the scheme is focused on incentivising businesses to adopt new technologies, the legislation does not exclude existing technologies.
- Are social media advertising expenses eligible?
While ATO guidance isn’t particularly clear on this area, we believe this expenditure falls under the grouping of Digital Media & Marketing and would be eligible for the boost assuming the advertising has a direct link to the business’ digital operations.
- What if I started digitalising my business before the boosts eligible period?
The boost exclusively looks at the date the expenditure has been incurred. Therefore, on-going monthly digital expenses paid during the eligible period would qualify, but any prior expenditure would not. However, if the prior expenditure related to depreciable assets the expenditure may still be eligible depending on the depreciation method.
For further details on the Small Business Technology Investment Boost please click on this Australian Tax Office link.
Please contact the team at MGI if you have any questions or require further information.