As part of the 2022/23 Federal Budget, the previous Coalition Government announced two new measures to encourage business investment, the Skills and Training Boost and the Technology Investment Boost, which allowed eligible businesses to claim an additional 20% deduction on eligible expenditure. The measures were first introduced into Parliament on 23 November 2022 but have recently received Royal Assent on 23 June 2023, meaning the measures are now law.
This article focuses on the Skills and Training Boost, outlining which businesses and expenditure are eligible.
To qualify for the additional 20% deduction, your business must be an eligible business with an aggregated turnover of less than $50 million in the income year in which the expenditure is incurred, commonly referred to as a ‘small or medium business’. The aggregated turnover of the business is its annual turnover, plus the annual turnover of any affiliates or connected business entities.
For the expenditure to be eligible it must be incurred between 7:30pm (ACT time) on 29 March 2022 and 30 June 2024 and provided for employees of your business, either in-person in Australia, or online. The expenditure must also be 100% tax deductible to your business under current taxation law.
The training expenditure must also be provided by a registered training provider, who is registered at the time the expenditure is incurred. To confirm whether a provider is registered, please refer to the training.gov.au website. And finally, the expenditure must be charged directly or indirectly to the employer by the registered training provider.
Unfortunately, expenditure incurred for training of non-employee business owners, such as sole traders or partners in a partnership, is specifically excluded.
Let us look at an example.
If your business incurred eligible training expenditure of $20,000 in the 2023 financial year and the business qualified as an eligible business, they would claim an additional 20% deduction on the expenditure in their income tax return, resulting in a $24,000 deduction. For a base rate entity taxed at 25%, this could be an additional tax saving of $1,000.
Therefore, the measure can provide a great tax benefit to your business, while also allowing you to invest in your number one asset, your employees.
This article first appeared in the Spring 2023 issue of HLB Mann Judd Perth’s Client Alert.