Chalmers backs $1bn digital SME tax sweetener


Joseph Brookes
Senior Reporter

Labor says it will support the $1 billion in tax incentives targeted at small and medium-sized enterprises (SMEs) unveiled in Treasurer Josh Frydenberg’s March federal Budget that aim to encourage investment in digital systems and training.

Labor’s support eases concerns that the 120 per cent tax deduction for SMEs investing in new technologies would be left in limbo, after the government failed to get  the measures legislated before the election was called.

Shadow Treasurer Jim Chalmers has backed a govt plan to give tax deduction bonuses to small businesses investing in digital

The government’s Technology Investment Boost will reduce the cost of Australian businesses adopting digital technologies by providing a bonus 20 per cent tax deduction for investments in “digital items” such as cloud computing, cyber security, accounting and e-invoicing software and web page design.

Small business purchases made from budget night until June 30 2023 would be eligible for the bonus deduction – for companies with annual revenue up to $50 million – with an annual cap of $100,000 per business.

The government expects this will cost around $1 billion over the forward estimates in foregone tax revenue but will “strengthen business confidence, accelerate digital transformation and create jobs”.

The measure was not legislated in the handful of sitting days left after the budget, leading to concerns it could be dropped if Labor wins the May election, and delivers its own budget later in the year.

But on Wednesday, Shadow Treasurer Jim Chalmers confirmed the party supports the Technology Investment Boost.

“Labor supports these measures that were announced in the Budget,” Mr Chalmers told InnovationAus.com.

“We will deliver a better deal for small business, provide certainty to the small business community in times of crisis, ensure they are paid on time, and cut unnecessary red tape and transaction fees.”

The government’s Technology Investment Boost has also been backed by the technology sector, including the Tech Council of Australia, which gave the measure prime billing in its budget response.

The influential new industry group, which has signed Labor on to its goal of 340,000 more technology jobs by 2030, welcomed Labor’s support of the measure on Wednesday.

“The Tech Council of Australia welcomes the bipartisan commitment to the investment measures announced during the Federal Budget into small business digital adoption through the Technology Investment Boost and the Skills and Training Boost,” Tech Council of Australia chief Executive Kate Pounder told InnovationAus.com.

“We have seen that businesses that invested in technology during the pandemic were more likely to stay open, recover more quickly and create more jobs. This tax incentive will help small businesses grow even further and keep creating jobs as we come out of the pandemic.  These measures to ensure we level the playing field for small businesses looking to invest in technology and boost their productivity.”

Exactly what will be eligible for the 20 per cent bonus tax deduction is not yet clear, with Treasury unable to work extensively on the measures before they are law. So far, portable payment devices, cyber security systems, subscriptions to cloud-based services, accounting and e-invoicing software and web page design have been mentioned by the government as eligible “digital items”.

Update: A spokesperson for Treasurer Josh Frydenberg said a consultation process will be conducted for the digital investment and the skills training measures before the legislation is introduced.

“In the 2022-23 Budget, the Government announced the Skills and Training Boost and the Technology Investment Boost to apply from Budget night,” the spokesperson told InnovationAus.com.

“These bonus deductions can be claimed on assessment when businesses lodge their annual income tax returns.

“Legislation will be introduced into parliament following consultation.”

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