Technology Investment Boost (“TIB”)
The Small Business Technology Investment Boost (“TIB”) allows small businesses with an aggregated annual turnover of less than $50 million to deduct an additional 20% of the expenditure incurred for business digital operations. This also extends to small businesses digitising their operations on business expenses and depreciating assets such as portable payment devices, cyber security systems or subscriptions to cloud-based services.
An annual $100,000 cap on expenditure will apply to each qualifying financial year. Businesses can continue to deduct expenditure over $100,000 under existing law.
Background
The TIB is a temporary measure aimed at supporting digital adoption by small businesses. It incentivises small businesses to take advantage of digital technologies, which are key to a stronger, productive and resilient economy.
The new tax incentive applies to eligible expenditure incurred between 7.30 pm AEST on 29 March 2022 and 30 June 2023. For taxpayers whose income year commences on 1 July, the 20% bonus deductions (for the 2022 & 2023 income years) are both claimed in the 2023 income tax return.
The Detail of the Technology Investment Boost
Entities eligible for the bonus deduction
The bonus deduction is available to small business entities with aggregated annual turnover less than $50 million for the income year in which the expenditure is incurred.
The expenditure must:
- already be deductible for your business under taxation law
- be incurred between 7:30 pm AEDT 29 March 2022 and 30 June 2023.
If the expenditure is on a depreciating asset, the asset must be first used or installed ready for use for a taxable purpose by 30 June 2023.
Digital operations
Eligible expenditure must have a direct link to the digital operation of the business. Expenditure must be incurred wholly or substantially for the purposes of an entity’s digital operations or digitising the entity’s operations.
There are four main business expenditure categories, however eligible expenditure is not limited to the following:
- Digital enabling items – computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks;
- Digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design;
- E-commerce – goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services and advice on digital operations or digitising operations, such as advice about digital tools to support business continuity and growth; and
- Cyber security – cyber security systems, backup management and monitoring services.
Expenses that cannot be claimed
Some types of expenditure are ineligible for the bonus deduction even where they would otherwise meet the requirements. These are:
- salary and wage costs;
- capital works costs which can be deducted under Division 43 of the ITAA 1997;
- financing costs;
- training and education costs; and
- expenditure that forms part of, or is included in, the cost of trading stock.
Key Takeaway
The Government’s goal in providing this temporary tax incentive is to encourage small businesses to take advantage of digital technologies. This tax incentive allows eligible businesses to claim an additional 20% deduction on already 100% deductible items such as technology hardware and software used for business purposes.
If you want to discuss the above and how you can take advantage of the Small Business Technology Investment Boost, please do not hesitate to contact our office.
Disclaimer
The information provided in this article does not constitute advice. The information is of a general nature only and does not take into account your individual situation. It should not be used, relied upon, or treated as a substitute for specific professional advice. We recommend that you contact Brentnalls WA before making any decision to discuss your particular requirements or circumstances.
