With tax time now upon us, the Australian Taxation Office (ATO) wants small businesses to be aware of some changes coming into effect regarding the new small business boost, temporary full expensing (recorded by 30 June 2023) and changes to the deduction rate ahead of the end of financial year.
ATO Assistant Commissioner Emma Tobias said ‘now is the time to talk to your tax professional if you think these things may be relevant for your business.’
Small business boosts now available
Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction to support their digital operations and digitise their operations. The boost applies to eligible expenditure incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2023.
The boosts are available for small businesses that have invested in digital operations, or skills and training – for example, new equipment like technology, cloud-computing, e-invoicing or cyber security.
Small businesses can claim a bonus 20% tax deduction for eligible expenses in their tax return, meaning for every $100 spent, you’ll get a $120 tax deduction.
But there are caps on the total amount that can be claimed. A small business can claim up to $20,000 as the bonus 20% deduction.
If you’re a small business who invested in technology or digital operations between 29 March 2022 and 30 June 2023, then this boost is for you.
It’s important to remember, any item you purchase must be first used or installed ready for use by 30 June 2023 in order to be eligible.
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Training boost till 30 June 2024
If you are spending money to train your new or existing employees, the Small business skills and training boost allows you to claim an additional 20% tax deduction to train new and existing employees between 29 March 2022 and 30 June 2024.
The training must be through a registered external training provider in Australia.
Temporary full expensing (TFE) ending 30 June 2023
Small businesses can still claim an immediate deduction for the cost of eligible assets first used or installed ready for use by 30 June 2023 in this year’s tax returns.
However, the end of TFE on 30 June 2023 means that the cost of assets that are not already being used or installed ready to use by 30 June 2023 are not eligible for an immediate deduction under TFE in small business tax returns this year.
TFE supports small businesses making capital purchases by allowing an immediate deduction for assets, rather than claiming the depreciation over a number of years.
If you’ve paid a deposit or received an invoice, but the asset was not installed and was not ready to use by 30 June 2023, then you will not be able to claim it. In that case you may still be able to claim deductions under the general or simplified depreciation rules. You should check with your tax and accounts consultant.
Deduction rate changes
Both the running a business from home deductions and car expense deductions have changed for this tax time.
The new cents per kilometer rate is 78 cents for 2022-23, but remember to keep written evidence to show how you worked out the work-related kilometers. This is method is available to sole traders and partnerships.
The car limit has increased to $64,741 for the 2022-23 income year.
The working from home deduction methods have also changed for this year. Small businesses can choose one of two methods to claim working from home deductions. Now you can either the actual cost or se a fixed rate method to make your claim.
Only the fixed rate method is changing.
However, your business structure can affect the method you can use and the expenses you can claim, especially if your business is a company or trust.
If you are claiming car or working from home deductions, make sure to keep good records. This will give you more flexibility to choose the approach that gives you the best deduction at tax time.
It is highly recommended that small businesses seek advice from a registered tax professional.