It’s crucial for Australian businesses to take advantage of the available tax deductions at the end of financial year (EOFY). This presents an excellent opportunity for them to invest in new IT infrastructure and enhance operational efficiency.
This article will explore how businesses can make the most of EOFY technology tax deductions while adhering to the Australian Taxation Office (ATO) regulations.
Understanding EOFY technology tax deductions
The government’s Instant Asset Write-Off is one of the easiest ways to avail of tax deductions. Under the scheme, small businesses with an aggregated turnover of less than AUD$ 50 million may be eligible to claim immediate tax relief for the business portion of the eligible assets cost. This deduction covers assets purchased and used in the year the write-off is claimed. From 2020 until 30 June 2023, organisations can get up to AUD$ 150,000 in asset write-offs as an incentive for automating their operations.
Additionally, businesses stand to benefit from the new measures that have yet to be enacted into law. Last year, the federal government introduced new measures to help businesses obtain a technology investment boost and offset the expense against their taxable income. These tax deduction proposals are called Small Business Technology Investment Boost and Small Business Skills and Training Boost.
Leveraging technology investment boost for EOFY deductions
With the Small Business Technology Investment Boost and Small Business Skills and Training Boost, Australian businesses have a unique opportunity to invest in technology and staff member training before the end of the financial year.
- Small Business Technology Investment Boost
The Small Business Technology Investment Boost allows eligible businesses with an aggregated turnover of less than AUD$ 50 million to claim an immediate tax deduction for the business portion of the eligible assets cost. The proposed 20% deduction enables businesses to invest in technology and offset expenses against their taxable income, providing substantial savings.
For example, a business investing AUD$ 20,000 in eligible technology assets can claim an immediate tax deduction for the full amount. Assuming a tax rate of 20%, this would result in a tax reduction of AUD$ 4,000.
The measure covers expenses incurred from 29 March 2022 to 30 June 2023.
- Small Business Skills and Training Boost
In addition to the Small Business Technology Investment Boost, ATO has introduced the Small Business Skills and Training Boost to support small businesses further. This tax incentive offers eligible small businesses an extra 20% reduction of expenditure on external training courses from 29 March 2022 to 30 June 2024. This initiative encourages businesses to invest in developing their workforce, fostering growth, and improving skills within the industry.
By leveraging these measures, businesses can enjoy immediate deductions for eligible technology purchases and save on hiring and training apprentices or trainees.
Identifying eligible technology investments
Identifying eligible technology investments is important to make the most of EOFY technology tax deductions. The ATO provides guidelines on eligible assets, including computer hardware and software, telecommunications equipment, network security systems, and office equipment.
To ensure you have accurate and up-to-date information on EOFY technology tax deductions, utilise reputable resources such as the ATO’s website. It provides comprehensive guidance on business tax deductions.
Documenting technology expenses
Proper documentation of technology expenses is essential to ensure a smooth tax deduction process. Maintain detailed records of all eligible technology investments, including purchase receipts, invoices, asset descriptions, and delivery dockets. Record the date that each asset was first used or installed. Accurate documentation will help substantiate your claims and demonstrate compliance with the ATO’s requirements.
Consulting with a qualified tax advisor or an IT professional can ensure that you fully understand the eligibility criteria, documentation requirements, and any additional considerations that may apply to your business.
Ensuring compliance and taking heed of deadlines
Compliance with ATO regulations is crucial when claiming EOFY technology tax deductions. Ensure that your technology investments meet the eligibility criteria and that all required documentation is in order. Remember that the Instant Asset Write-Off, Small Business Technology Investment Boost, and Small Business Skills and Training Boost have specific coverage periods and deadlines, so plan your purchases and installations accordingly to meet the EOFY cut-off.
Strategic planning for future investments
As you approach the end of the financial year, take the opportunity to review your technology infrastructure and plan for future investments. Assess your current IT systems, identify areas that can benefit from technology upgrades, and create strategies for the upcoming year.
By aligning your technology investments with your business goals, you can make informed decisions that will drive growth and efficiency in the long run.
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Seeking professional advice
Seeking professional advice is always recommended, especially on tax matters. Thus, businesses should consult a tax advisor or the ATO for specific calculations and eligibility criteria. This helps ensure your purchases meet the latter’s criteria and that you don’t miss anything while planning your technology training and investments.
Leveraging EOFY technology tax deductions offers short-term financial advantages and improves business efficiency and growth. The amount of savings depends on several factors, including the cost of eligible assets and the business’s taxable income.
Besides the immediate financial benefits, it’s important to recognise the broader advantages of technology investments. These can enhance business operations, streamline processes, improve productivity, and increase competitiveness.