A $1.55 billion package of ‘bonus’ tax deductions for small businesses is expected to deliver a further $300 million in benefits, according to new Treasury estimates.
Announced by the Morrison government in the March 2022 federal budget and enacted by the Albanese government in 2023, the Technology Investment Boost and the Skills and Training Boost offered small businesses 20% ‘bonus’ deductions on eligible expenditure.
The technology package, covering upgrades for items like computers, servers, and security camera systems, was expected to deliver tax relief of $1 billion to eligible small businesses.
The training package, applicable to spending on external training providers, was initially forecast to provide $550 million in tax relief.
Small businesses could claim ‘bonus’ deductions on relevant spending from March 29, 2022, until June 30, 2023, for the Technology Investment Boost, and until June 30, 202,4 for the Skills and Training Boost.
However, the Treasury’s 2024-2025 Tax Expenditures and Insights Statement, released on Tuesday, suggests the real dollar value of those programs could be much larger than first thought.
The Technology Investment Boost is projected to result in $1.15 billion in forgone tax revenue between 2023-2024 and 2025-2026, which is $150 million above the plan put forward by the Coalition and enacted under Labor.
And the Skills and Training Boost is forecast to cost $700 million in forgone tax revenue, which represents another $150 million above the original federal budget projection.
The figures match the early estimates put forward in last year’s Tax Expenditures and Insights Statement, and come with ‘medium’ levels of confidence from Treasury.
They also suggest many small businesses are likely to make delayed ‘bonus’ deduction claims years after the relevant spending was incurred.
Not everyone believed those programs would translate into tangible benefits for small businesses.
A parliamentary stoush over legislation to enact the ‘bonus’ deductions saw them pass into law just days before June 30, 2023.
That delay caused Independent Senator David Pocock to fear uncertainty over the measures would discourage small businesses from making the relevant investments at all.
However, Finance Minister Katy Gallagher disputed his argument, saying the full value of the policies would not be known for some time.
The latest report also sheds light on the Small Business Energy Incentive, a similarly devised scheme that granted small businesses 20% tax deductions on electrification and energy efficiency upgrades.
The Albanese government committed $310 million to that incentive in its 2023-2024 federal budget.
The Treasury report estimates forgone tax revenue will actually reach $320 million, a $10 million uptick from the figure listed in last year’s budget papers.
Never miss a story: sign up to SmartCompany’s free daily newsletter and find our best stories on LinkedIn.
Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
Comments