This year’s Federal Budget brought news that will impact businesses as they prepare to do end-of-financial year taxes, including the cancellation of a temporary pandemic expensing measure, exemptions for some businesses that received COVID-19 support and grants, and new small business tax deductions relating to digital technology investment and training.
Also, people on work from home (WFH) arrangements will again need to figure out how to make WFH deductions as they prepare their individual tax returns for this financial year.
Temporary full expensing of new equipment not extended
There’s good and bad news for SMEs who have, or are hoping to, spend on new technology and training.
Earlier on in the pandemic, a temporary full expensing measure was introduced to encourage businesses to invest in new equipment, which saw businesses being able to write off the full cost of purchases against their tax in that year, rather than having to claim depreciation over many years. This is not being extended, so businesses hoping to capitalise on it would need to have any new equipment installed or in use by June 30, 2023, to claim full expensing.
Technology investment boost
However, to encourage more businesses to go digital, the government is introducing a Small Business Technology Investment Boost.
Small businesses with annual turnover less than $50 million will be able to deduct a bonus 20 per cent of the cost of expenses and depreciating assets that support digital uptake. This includes portable payment devices, online sales systems, cyber security systems or subscriptions to cloud-based services. The boost will apply to eligible expenditure of up to $100,000 per year, incurred from 29 March 2022 until 30 June 2023.
Skills and training boost
The Small Business Skills and Training Boost will offer small businesses access to a new 20 per cent bonus deduction for eligible external training courses for upskilling employees. The Skills and Training Boost will apply to expenditure incurred from 29 March 2022 until 30 June 2024.
For every hundred dollars a small business spends they will get a $120 tax deduction. This additional technology deduction applies to business expenses and depreciating assets that support their digital adoption, such as portable payment devices, cyber security systems or subscriptions to cloud-based services.
The training deduction includes digital technologies, such as cloud computing, e-invoicing, cyber security and web design, but businesses should be aware that additional training deduction only applies to courses delivered by external providers registered in Australia.
Tax exemptions for some COVID-19 business support and grants
Many businesses also received COVID-19 business grants and support programs in the past financial year. Tax does not need to be paid on some COVID-19 payments from the government to support businesses. Not all grants or support programs that have been announced are eligible for NANE income treatment however and some grants are taxable.
These payments will be non-assessable non-exempt (NANE) income for tax purposes if they are received under an eligible grant or support program and the eligibility criteria are met. There are two types of government grant and support programs, under which COVID-19 payments to support businesses may be non-taxable. These are:
- state and territory grants relating to the recovery from COVID-19
- Australian Government support payments established under the COVID-19 Business Assistance Program.
Find out more about eligibility criteria.
How to claim WFH costs
With so many people newly working from home during the pandemic the government introduced some new measures to make claiming these expenses easier in 2020 which still apply at least for this financial year ending June 30, 2022. Find out more about how to claim working from home expenses.
Need help with your business taxes or other financial advice? Call us anytime on (02) 8268 2900 for an obligation-free chat.
Disclaimer: The information contained in this article is general in nature and does not take into account your personal objectives, financial situation or needs. Please consider whether the information is appropriate to your circumstance before acting on it and, where appropriate, seek professional advice.