Boost for Small Businesses:
Technology Investment Boost and Skills and Training Boost are two vital financial measures the government of Australia announced to boost the business and sentiment of small businesses in Australia. Technology Investment boost proposes financial leverages and benefits for adopting digitisation. Skills and Training Boost incentivises businesses with monetary relief for spending on the skill development and training of the employees.
Background:
Coronavirus has been raking havoc across the globe since December 2019. It increased the economic threat levels in every economy. Initial phases saw strict lockdown to prevent the disease from spreading. Resultantly, all types of businesses were shut down by the government. Since then, the government of Australia has been persistent and is consistently providing material and monetary support to small businesses.
Small and medium enterprises are considered the backbone of the economy, but MSMEs are vulnerable to minor hiccups in the economy. Given the sensitive nature of the small enterprises, they require support or stimulus from the government. While most governments in Europe and Asia withdrew from the stimulus scenes as the Covid impact ameliorated, Government in Australia continues to stand behind the businesses.
Let us look into how these two measures help small businesses gain financial benefits.
Small Business Technology Investment Boost
The government in Australia motivates businesses, especially the small ones, to adapt to digitisation. Since digitalisation cost is high for small businesses, the government decided to deduct 20% of those expenses from taxable income. So if you are a small business having a turnover below $50 million, you will be leveraging Technology Investment Boost benefits.
Payment devises and gateways to office automation to cloud migration and cyber security are big bucks raking expenses. However, the boost also includes costs incurred on assets that depreciate during digitisation.
Moreover, the government has suggested that businesses continue to deduct the disqualified expenditures for bonus deduction as per the existing law.
However, to avoid the misuse, the government has capped the annual deduction amount at $100,000 and clarified that existing law permits businesses to deduce more than the cap.
Deduction Applicability Period:
Expenses incurred between March 29, 2022, and June 30, 2023, will be eligible for the deduction under the technology investment boost.
How to Claim the Deduction
Claim the digitisation cost as per the regular cost for your 2021-22 tax return, and small businesses can claim an additional deduction of 20% in the fiscal year 2022-23.
That means businesses will be able to claim a 120% cost reduction in 2022-23 for the expenditure incurred between July 01 2022, and June 30, 2023.
Small Business Skills and Training Boost
Small business owners may not hire too many people, but they usually employ unskilled employees. So there is a reason for hiring untrained employees as they cost less. However, businesses need to provide some training to their employees to get the work done efficiently. Providing employee training isn’t cost-free as many of us might think.
Keeping in mind the training and skill upgradation cost that small businesses incur on behalf of their employees, the government of Australia has decided to offer an additional 20% cost deduction on expenses accrued by the companies on employee training and skill improvement.
However unsuitable, 20% of such expenses will be exempted from the taxable income for the small businesses. In addition, companies with an annual turnover of less than $50 million are eligible for the Skills and Training Boost.
Deduction Applicability Period:
Training expenses incurred between March 29, 2022, and June 30, 2024, will be eligible for the deduction under the technology investment boost.
In simple terms, expenses incurred during the 4th quarter of the current financial year will be available for deduction in the following year. However, for the financial year 2022-23 and 2023-24, the deduction will be applicable in the same year’s tax return.
How to Claim the Deduction
Claim the skill improvement and training cost as per the regular cost for your 2021-22 tax return, and small businesses can claim an additional deduction of 20% in the fiscal year 2022-23.
That means businesses will be able to claim a 120% cost reduction in 2022-23 for the expenditure incurred between July 01 2022, and June 30, 2023.
For the year 2023-24, small businesses will be able to claim a 120% deduction on training costs in the same financial year’s tax return.
Conclusion:
Due to the lockdown in China, the ongoing war in Ukraine, and climate change, energy and commodities prices are rising at a skyrocketing speed. As a result, the overhead cost and operations costs of the businesses have shot to unparallelled levels in the last six months.
The government of Australia thoroughly evaluated the situation in the international market and found that small and medium businesses should be protected at home by providing various support measures. Such proactive measures would help small enterprises to sustain in a challenging market and continue to operate at the lower threshold for an extended time.
In case of more queries, you can always get in touch with us for more clarification on various government schemes for small businesses.
