“Do or die”: Tech players welcome government commitment to $1.55 billion “bonus” tax offsets for SMEs

Business bookkeeping platforms have welcomed draft legislation which could create $1.55 billion in “bonus” tax offsets for small businesses, but accounting experts have urged entrepreneurs to read the fine print before spending big on employee training programs.

The Treasury revealed exposure drafts covering both the Skills and Training Boost and the Technology Boost on Monday, marking the latest phase in the Albanese government’s plan to legislate tax measures introduced by the Morrison government in its 2022-2023 Federal Budget.

The Skills and Training Boost exposure draft promises small businesses with an aggregated turnover of less than $50 million a year the ability to claim a 20% “bonus” tax deduction for external employee training, up to $20,000 per income year.

The measure will help employers “build a better trained and more productive workforce”, the exposure draft says.

If legislated, the plan will allow eligible business to claim an effective 120% offset for their training expenditure until June 30, 2024.

Budget papers say the plan will cost the taxpayer $550 million over the program’s lifespan.

Similarly, the Technology Boost is intended to provide small businesses with a 20% “bonus” offset for relevant upgrades and digital improvements, capped at $100,000 of expenditure, and $20,000 in bonus deductions per income year.

Upgrades covered by the Technology Boost exposure draft go beyond computers and telecommunications hardware alone: expenditure on software and network systems is covered, along with spending on digital media, online marketing, digital service subscriptions and e-commerce upgrades.

The exposure draft states that plan will extend until 30 June 2023, with budget papers estimating a cost of $1 billion.

The Treasury’s new exposure drafts also confirm tax offsets provided by the Skills and Training Boost and the Technology Boost will backdate to the evening of March 29, 2022, when former treasurer Josh Frydenberg handed down the budget and invited small businesses to spend on training and tech upgrades.

Tech investment “do or die” for SMEs, MYOB says

Although current Treasurer Jim Chalmers previously expressed support for the Technology Boost, the new exposure drafts serve as the most serious indicator yet that the Albanese government will back two pricey programs left by their predecessors.

While both measures still require legislation to come into effect, business bookkeeping and payroll platforms — whose services would be covered by the Technology Boost — are encouraged by the exposure drafts.

The measures show the Albanese government “recognises the productivity benefits of a more innovative small business sector”, says Joseph Lyons, Xero’s APAC managing director.

“The Tech Investment Boost will lower the barriers to increasing technology use, and a cash flow boost for existing eligible technology spend.

“In both instances, increased efficiency will give businesses time and resources to put towards more productive tasks.”

MYOB CEO Greg Ellis says the exposure drafts come at a pivotal time for Australia’s business community.

“In a post-pandemic world, do or don’t with digital is no longer a choice,” he said.

“It’s a case of do or die for any business to succeed in our new economic terrain.”

However, businesses should still do their due diligence before throwing money at expensive training staff training programs, says Mark Molesworth, tax partner at BDO.

While the Training Boost exposure draft doesn’t limit the kind of training employees can undertake, it says training providers must be qualified and accredited under the Australian Skills Quality Authority, Tertiary Education Quality and Standards Agency, or similar state bodies in Victoria and Western Australia.

In addition, the exposure draft says the Skills and Training Boost will only cover training for employees, meaning self-employed workers and independent contractors are ineligible.

Molesworth says the federal budget announcement may have encouraged small businesses to invest in training programs excluded from the new exposure draft.

“This is a prime example of the dangers of three line announcements with insufficient details,” he said.

Checking to see if those training programs met the new criteria could be costly and time-consuming for small businesses, he adds.

“Not many employers would have recorded, by item of expenditure, whether the provider of the course was registered under a relevant piece of legislation.

“To now go back and re-categorise the expenditure from April onwards, for a tax benefit of between 5 and 9 cents in the dollar of expenditure, may just not be worth it for small businesses.”

Stakeholders with views on the exposure drafts can submit their views directly to the Treasury.

Submissions close September 19.