Small businesses have just hours left to comment on the shape of $1.55 billion in ‘bonus’ tax offsets

Small businesses and training organisations have less than a day left to comment on draft legislation covering the Skills and Training Boost, which could exclude self-employed workers from up to $550 million in “bonus” tax offsets.

The Morrison government unveiled both the Skills and Training Boost and the separate $1 billion Technology Boost in its 2022-2023 federal budget, saying small businesses would be free to claim an extra 20% tax deduction on eligible expenditure.

The $1.55 billion scheme has received provisional support from the Albanese government, which last month shared draft legislation covering both big-spending programs.

The consultation period officially closes today, Monday, September 19, giving interested parties precious little time to share their views on the government’s proposed bill.

Both schemes have been broadly welcomed by the SME sector, alongside accountants, tech providers, and training industry participants.

“CPA Australia has been asking the federal government to proceed with these extra deductions since the election,” CPA Australia chief executive Andrew Hunter said when consultations opened.

“We urge the government to legislate these important policies quickly following the consultation period.”

However, draft legislation covering the Skills and Training Boost suggests some small business proprietors could find themselves locked out of the scheme.

Explanatory materials attached to the draft legislation state only employee training will be eligible for the bonus 20% tax deduction.

It is “not available for the training of non-employee business owners such as sole traders, partners in a partnership and independent contractors (who are not ‘employees’ of the business within the ordinary meaning)”.

Limiting the program’s scope in that way will encourage small business leaders to grow their headcount, “which could include taking on less-skilled employees that may need external training to develop their skills and enhance their productivity”, the document says.

In addition, expenditure on ‘in-house’ training will not be eligible for bonus tax deductions under the current draft legislation.

Further, the bonus tax deductions will only be made available if the training took place at a provider approved to provide lessons in that field.

“Expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope (if any) of the provider’s registration,” the document states.

As the draft legislation states the bonus tax deductions will be backdated to the evening of March 29, 2022, some tax experts suspect small businesses could have already been tripped up by those guidelines.

“Not many employers would have recorded, by item of expenditure, whether the provider of the course was registered under a relevant piece of legislation,” Mark Molesworth, tax partner at BDO, said earlier this month.

“To now go back and re-categorise the expenditure from April onwards, for a tax benefit of between 5 and 9 cents in the dollar of expenditure, may just not be worth it for small businesses.”

Stakeholders with views on the exposure drafts have limited time to share their views directly to the Treasury.