Federal Budget 2022: Small businesses receive tax breaks for new tech

Small businesses are being incentivised to embrace digital transformation via bonus tax breaks and red tape cuts. See how your business is affected.

Millions of small businesses are being encouraged to fast-track their digital transformation via a bonus tax deduction for investments in new technology.

Businesses with annual turnover of less than $50m are eligible for the new Technology Investment Boost, which offers a bonus 20 per cent tax deduction for costs such as online sales platforms, cloud computing, portable payment devices and cyber security systems.

Annual expenditure is capped at $100,000 under the $1b program, which applies to expenditure incurred from its launch on Tuesday night until June 30 next year.

It builds on the government’s instant asset write-off scheme which also runs until the end of June 2023.

“In this budget, we are backing small businesses that are embracing the digital revolution,” Treasurer Josh Frydenberg said during his budget speech on Tuesday night.

“From tonight, every hundred dollars these small businesses spend on digital technologies like cloud computing, eInvoicing, cyber security and web design will see them get a $120 tax deduction.

Small business owners such as Chatswood’s Fiona Bolus are being incentivised to embrace digital transformation via bonus tax breaks and red tape cuts. Picture: Renee Nowytarger

“Lower taxes for small business is part of our plan for a stronger future.”

The tax incentive forms part of the federal government’s “Digital Economy Strategy”, which will provide $130.1m over four years to drive forward the economy’s digital transformation.

It is aimed at positioning Australia to be a top 10 digital economy by 2030.

The government on Tuesday also confirmed that small businesses would benefit from a $1.85b cash flow boost as part of a long-term overhaul of the pay as you go (PAYG) tax system.

Increases in PAYG and GST instalments will be capped at 2 per cent in the 2022-23 financial year, compared to the 10 per cent that would have otherwise faced business owners under the “GDP uplift” formula that usually determines quarterly payments.

It means about 2.3 million eligible small businesses and sole traders will be able to defer their tax expenses until their final payment at the end of the year.

Technology upgrades are also in the works, and from early 2024 it is expected that PAYG will be calculated in real-time based on current financial performance.
It would allow an automatic refund of tax to be paid in the year if a large loss is reported.

Payroll data will also be better integrated with state-based tax agencies via the technology upgrades, which are expected to save businesses up to $800m in compliance costs.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said the changes would ease the regulatory burden on small business owners.

“Changes to the calculation of pay as you go instalments from next financial year will benefit more than two million small businesses, enabling employers to invest in productivity enhancing measures and take on new hires,” he said.

Australian Chamber of Commerce and Industry CEO Andrew McKellar said the changes will mean greater productivity for small businesses. Picture: supplied.

“The establishment of an automated system that adjusts tax instalment calculations based on annual financial performance will act as a critical cash flow boost when many businesses are struggling with increased costs.

“Too often we hear of layer upon layer of regulatory bottlenecks that hold back businesses from realising their potential. The strength of our economic recovery is contingent on removing the regulatory burden on business, particularly for small and medium enterprises.”

Among a range of other budget measures aimed at supporting small and medium-sized businesses, the government on Tuesday committed to:

+ AN additional $1bn in funding to support the country’s transition to modern manufacturing;

+ EASING restrictions on the number of shares unlisted companies can issue to employees as part of their remuneration;

+ CREATING a $250m “critical minerals” accelerator program and research and development centre;

+ A $2.2b research commercialisation action plan to bring industries and universities together, including a $1.6b accelerator program;

+ A $267.1m Simplified Trade System to help agricultural businesses and exporters compete internationally; and

+ ESTABLISHING a dedicated small business unit in the Fair Work Commission, helping

employers navigate their workplace obligations.