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23rd Oct, 2023
The ATO has advised that new and ongoing subscription costs can also qualify as eligible expenditure for the purposes of the digital adoption boost. This was not specified in the ATO’s original release on the measure.
The additional 20% tax deduction applies to eligible expenditure incurred by small and medium business entities between 7:30 pm AEDT on 29 March 2022 and 30 June 2023. The boost is for business expenses and depreciating assets and is capped at $100,000 of expenditure per income year. Eligible claimants can receive a maximum bonus deduction of $20,000 per income year.
In its latest release, the ATO states that a good rule of thumb is to consider “if the small business would have incurred the expense if they didn’t operate digitally. That is, if they hadn’t sought to adopt digital technologies in the running of their business”.
Using this rule of thumb, the ATO confirms that these costs are eligible:
Whether some expenditure is eligible for the boost will depend on its purpose and its link to digitising the operations of the specific small business. For example, “the cost of a multifunction printer would not be eligible if it were intended to only make copies of paper documents. However, it would be claimable if being used to convert paper documents for digital use and storage”.
Importantly, the ATO states that new and ongoing subscription costs can also qualify as eligible expenditure if it relates to a taxpayer’s digital operations; for example, an ongoing subscription to an accounting software platform for the business would qualify, as would a new subscription for digital content that is used in developing web content to advertise the business.
23rd Sep, 2023
The Federal Government has released plans to introduce a small business energy incentive to help small and medium businesses electrify and save on their energy bills. The proposal was in the consultation stage until late July, but once implemented it may see businesses with an aggregated annual turnover of less than $50 million gain access to a bonus 20% tax deduction for the cost of eligible depreciating assets that support electrification and more efficient use of energy. It is projected to apply for the 2023–2024 income year.
Eligible depreciating assets would include any asset that:
In order to claim the bonus deduction, the business must make the expenditure for a taxable purpose; therefore, costs will need to be apportioned if the asset has a mix of private and business use.
If both the small business and the asset meets eligibility requirements, the amount of bonus deduction is 20% of the total eligible cost, up to a maximum of $20,000 across the bonus period.
19th May, 2023
The Government will temporarily increase the instant asset write-off threshold to $20,000 from 1 July 2023 to 30 June 2024.
Small businesses – those with aggregated annual turnover of less than $10 million – will be able to immediately deduct the full cost of eligible assets costing less than $20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024. The $20,000 threshold will apply on a per-asset basis, so small businesses can instantly write off multiple assets.
Assets valued at $20,000 or more (which cannot be immediately deducted) can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year thereafter.
The provisions that prevent small businesses from re- entering the simplified depreciation regime for five years if they opt out will continue to be suspended until 30 June 2024.
The instant asset write-off rules allow for the immediate deduction for the cost of a depreciating asset for small business entities. However, those rules were effectively replaced by temporary full expensing in relation to depreciating assets first held, and used or installed ready for use for a taxable purpose, between the 2020 Budget time (6 October 2020) and 30 June 2022, then extended to 30 June 2023.
Given that temporary full expensing will not be available in 2023–2024, the instant asset write-off rules come back into play. The threshold is currently $1,000 (but note again, this was not relevant while temporary full expensing allowed the cost of any qualifying asset to be written off immediately – which of course was available to other categories of taxpayers, not just small business entities).
Small business entities that use the simplified depreciation rules in Subdiv 328-D of the Income Tax Assessment Act 1997 are entitled to an outright deduction for the “taxable purpose proportion” of the “adjustable value” of a depreciating asset if:
The deduction is available in the income year in which the taxpayer first uses the asset, or first installs it ready for use, for a taxable purpose. The deduction is known as the “instant asset write-off”.
A depreciating asset is a low cost asset if its cost as at the end of the income year in which the taxpayer starts to use it, or installs it ready for use, for a taxable purpose is less than the relevant threshold.
The Budget papers confirmed that the Small Business Energy Incentive will provide businesses with annual turnover of less than $50 million an additional 20% deduction on spending that supports electrification and more efficient use of energy. This measure was originally announced by the Treasurer on 30 April 2023.
The Small Business Energy Incentive will apply to a range of depreciating assets, as well as upgrades to existing assets. These will include assets that upgrade to more efficient electrical goods such as energy- efficient fridges, assets that support electrification such as heat pumps and electric heating or cooling systems, and demand management assets such as batteries or thermal energy storage.
However, certain exclusions will apply, such as:
Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
Full details of eligibility criteria will be finalised following consultation.
19th May, 2023
The Government announced that a lodgment penalty amnesty program will be provided for small businesses with aggregate turnover of less than $10 million to encourage them to re-engage with the tax system.
The amnesty will remit failure-to-lodge penalties for outstanding tax statements lodged in the period from 1 June 2023 to 31 December 2023 that were originally due during the period from 1 December 2019 to 29 February 2022.
The Government will also provide funding from 1 July 2023 over four years to assist the ATO to engage more effectively with businesses to address the growth of tax and superannuation liabilities.
The additional funding will facilitate ATO engagement with taxpayers who have high-value debts over $100,000 and aged debts older than two years where those taxpayers are either public and multinational groups with an aggregated turnover of greater than $10 million, or privately owned groups or individuals controlling over $5 million of net wealth.
The Government will provide $588.8 million to the ATO over four years from 1 July 2023 to continue a range of activities that promote GST compliance.
These activities will ensure businesses meet their tax obligations, including accurately accounting for and remitting GST, and correctly claiming GST refunds. Funding through this extension will also help the ATO develop more sophisticated analytical tools to combat emerging risks to the GST system.
14th Apr, 2022
The availability of temporary full expensing of depreciating assets for business has been extended for another year until 30 June 2023. This measure was originally introduced in 2020 as a part of the Federal Government’s COVID-19 business rescue package, aimed at encouraging business investment by providing a cash flow benefit. As originally introduced, the measure was due to end on 30 June 2022.
Businesses with an aggregated turnover below $5 billion or those that meet an alternative eligibility test can deduct the full cost of eligible depreciating assets of any value that are first held and first used or installed ready for use for a taxable purpose from 6 October 2020 until 30 June 2023.
For small business entities with an aggregated turnover of less than $10 million, the temporary full expensing of depreciating asset rules has been effectively replaced with simplified depreciation rules for any assets first held and used or installed ready for use for a taxable purpose between 6 October 2020 and 30 June 2023. This means that the full cost of eligible depreciating assets, as well as costs of improvements to existing eligible depreciating assets, can be fully deducted.
Not all costs relating to assets qualify for temporary full expensing. For example, building and other capital works, as well as software development pools do not generally qualify. Second-hand assets that would otherwise meet the eligibility conditions also do not qualify for temporary full expensing if the entity that holds them has an aggregated turnover of $50 million or more.
Special rules also apply to cars, where the temporary full expensing is limited to the business portion of the car limit.
14th Apr, 2022
If you run a small business and are found by the ATO to have made unintentional record-keeping mistakes, you could face having to pay an administrative penalty. However, this could soon change under a proposed new law that would give ATO the power to issue a direction to complete an approved record-keeping education course instead. Legislation to implement this measure has been introduced into Parliament but not yet passed.
This proposed change originated as a part of the Black Economy Taskforce’s final report, which found that tax-related record-keeping obligations should be made clearer for businesses, and that the ATO should have a range of administrative sanctions available at its discretion for breaches of the rules.
Under the proposed new law, the ATO may issue a tax-records education direction in appropriate situations, which will require the appropriate person within a business to take a specified, approved course of education and provide the ATO with evidence of completion. This would be applied in circumstances where the record-keeping mistakes were unintentional, due to knowledge gaps or variations in levels of digital literacy, or where the ATO reasonably believes that the entity has made a genuine attempt to comply with their obligations.
The tax-records education direction would not be available to businesses that deliberately avoid record-keeping obligations. In those cases, financial penalties will still be applied, and if there is evidence of serious non-compliance, the ATO may also consider criminal sanctions.