$1.5 billion in ‘bonus’ tax deductions for small business stuck in legislative limbo despite bipartisan support

‘Bonus’ tax deductions incentivising small businesses to invest in digital upgrades and staff training are yet to be passed into law, a year after the Morrison government first introduced the dual policies.

While Australia’s SME sector is keenly awaiting new policies in Tuesday’s federal budget, the Technology Boost and Skills and Training Boost, both of which were introduced in the March 2022 budget, remain in legislative limbo.

Announcing the policies on March 29 last year, then-Treasurer Josh Frydenberg promised small businesses with an annual turnover of less than $50 million access to an extra 20% tax deductions on relevant expenditures up to $100,000.

The Technology Boost covers everything from computers to cloud subscription services and e-commerce upgrades, and was designed to improve small business productivity in a rapidly digitising landscape.

Spending incurred between 7.30pm on March 29, 2022 to 30 June 2023 is eligible for the bonus deduction, effectively granting small businesses as much as a $20,000 bonus deduction.

Similarly, the Skills and Training Boost covers third-party training for small business employees, with the intention of future-proofing the SME workforce — an especially important field, given ongoing workforce shortages.

That policy extends from March 29, 2022 through to 30 June 2024.

With Frydenberg’s promise, businesses were free to spend on tech upgrades and training courses on the understanding those expenses could incur a bonus tax deduction.

The measures, which required legislation to come into effect, were not passed before the Coalition’s ouster in the May 2022 election.

However, the Albanese government voiced its support for the twin policies, and Treasurer Jim Chalmers released draft legislation outlining the policies in August.

That legislation was finally tabled in the House of Representatives in November, but it currently remains before the Senate.

With just weeks before the end of the financial year, lawmakers have precious little time to pass the legislation underpinning those policies, which the Morrison government projected to provide $1.5 billion in benefits to the SME sector.

Even so, it appears the policies remain popular among both the Coalition and Labor.

In its report on the Treasury laws amendment containing the boost legislation, a bipartisan Senate committee voiced its support for the policies in their current shape.

“The committee considers that the design of the boost will provide appropriate support for small businesses to build a better trained and more productive workforce in a fiscally constrained environment,” the report said.

“The committee considers that ensuring people who are employed by SMEs have access to training and digital tools is essential to building a sustainable economy as well as developing transferable skills across the workforce.”

More to come.