Published on the 08/09/2022 | Written by Heather Wright

Draft legislation on AU$1.5 billion deductions sees light of day…

Australia’s small businesses are a step closer to gaining access to the promised AU$1.5 billion in tax deductions for technology upgrades and digital skills training after draft legislation was unveiled last week.

The tax breaks were first announced by the former Coalition government as part of the 2022 federal budget in March, providing a much needed boost for small businesses to invest in digital technology and skills training.

“These measures will help small businesses recoup some of the costs of the investments they make in their employees and digital operations.”

However, legislation – and the planned consultation pre-legislation – wasn’t introduced to parliament under the Coalition government before the election.

The Technology Investment Boost will provide Australia’s 3.7 million small businesses – defined as those with annual turnover of less than $50 million – with a bonus 20 percent deduction for eligible expenditure of up to $100,000 a year on new technologies. A cap of $20,000 is in place as the maximum bonus deduction per year.

It means that for every $100 spent on digital technologies such as cloud computing, eInvoicing, cybersecurity and web design, small businesses will be eligible for a $120 tax deduction. 

Investment in training will see a similar tax break through the Skills and Training Boost. 

Both will apply until 30 June 2024 and will be backdated to 29 March 2022. 

“The Albanese Labor Government is making these tax incentives law because we recognise that better trained workers and more productive small businesses are a win-win for the economy,” Treasurer Jim Chalmers said in a joint statement with Minister for Small Business Julie Collins and Assistant Treasurer Stephen Jones.  

“These measures will make it easier for small businesses and help them recoup some of the costs of the investments they make in their employees and digital operations,” they say.

The group say the government recognises that training employees is expensive and takes time, both of which are at a premium when employers are trying to run a small business.

Small businesses make up around 98 percent of Australia’s businesses, employing over 40 percent of the domestic workforce and contribute the equivalent of one-third of Australia’s GDP. But despite plenty of evidence of the benefits of digital for business, many SMBs lag behind in adoption. 

Gavan Ord, CPA Australia senior manager business policy, says Australian small businesses’ inability to participate in the digital economy is leading to them being out-performed by regional peers.

“There is a positive correlation between digital adoption and business growth. But when it comes to Australian small businesses, technology is their weak link,” Ord says.

The survey showed Australian small businesses had the lowest growth rates across Asia Pacific in 2021 – with more small businesses shrinking than growing in 2021. That lead the CPA to dub small businesses a ‘weak link in Australia’s digital economy’.

CPA Australia’s newly released Business Technology Report 2022, which surveyed accounting and finance professionals across APAC countries including Australia and New Zealand and covers businesses both large and small, shows Australian businesses that experienced growth over the last year used technology more often than those who didn’t grow. 

“The proportion of respondents from high-growth or larger businesses reporting that their organisation has a digital transformation strategy was overwhelmingly higher than respondents from smaller businesses or those who stated that their business shrank,” the report says. 

The report shows significantly lower technology pushes for smaller businesses – in this survey defined as 100 staff or fewer – in the past 12 months, compared to larger businesses. 

While 63 percent of larger businesses increased their investment or upgraded technology in the past 12 months, that number fell to 39 percent for businesses with fewer than 100 employees. Just 34 percent of smaller businesses upskilled the tech capabilities of their staff, versus 56 percent of larger businesses. And increased cybersecurity investment lagged too: Just 31 percent for smaller businesses, versus 55 percent of larger businesses.

But it’s not all about the technology. An earlier CPA Australia report noted that Australian small businesses were least likely to say their investment in technology increased their profitability – something the CPA attributes in part to the lower technology adoption and the older ages of Australian small business owners.

“Even when Australian small businesses do invest in technology, they underperform their regional counterparts in selecting technology that improves profitability,” CPA Australia’s Asia-Pacific Small Business Survey 2021-22 says. 

Both the Technology Investment Boost and Skills and Training Boost were welcomed by industry, including the Tech Council of Australia, when they were announced in March.

Kate Pounder, Tech Council of Australia CEO, says the funding will help small businesses grown and increase productivity and to invest in improving technology skills in areas such as cyber security. 

“This measure will level the playing field for small businesses looking to invest in technology and boost their productivity,” Pounder says. 

The draft legislation and consultation comes as efforts to address staff shortages across Australia step up. Last week saw the two-day Jobs and Skills Summit taking centre stage with industry leaders, business groups, employers, unions and politicians came together to address the issues.

Prime Minister Anthony Albanese has called the summit a ‘huge success’, ‘bringing Australians together to agree on immediate actions to help build a stronger economy and stronger Australia’. Thirty-six immediate initiatives were agreed to, including an additional AU$1 billion for fee-free TAFE in 2023 and accelerated delivery of fee-free TAFE positions, 1,000 digital apprenticeships in the Australian Public Service, improving access to jobs and training pathways for under-represented people and visa and migration program changes to ease critical workforce shortages and enable international students to work.

Consultation for the Technology Investment Boost and Skills and Training Boost closes 19 September, with draft legislation expected to be introduced into parliament this year.