Hospitality owners will be glad to learn that a law passed on 26 June 2023, that allows an additional tax deduction for costs related to the use of apps and other technology used to grow revenue.
The Small Business Technology boost is available to businesses that qualify as a small to medium business (aggregated annual turnover less than $50 million). It allows businesses to access an additional 20% when claiming costs that were wholly or substantially incurred for the purposes of enhancing the entity’s digital operations or to digitalise their operations. This means that rather than claiming 100% of eligible expenses, 120% of eligible expenses can be claimed in the 2023 tax return.
The below list of inclusions is taken from the Explanatory Memorandum to Act 29 of 2023.
- Digital enabling items — computer and telecommunications hardware and equipment, software, internet costs, systems and services that form and facilitate the use of computer networks.
- Digital media and marketing — audio and visual content that can be created, accessed, stored or viewed on digital devices, including web page design
- E-commerce — goods or services supporting digitally ordered or platform-enabled online transactions, portable payment devices, digital inventory management, subscriptions to cloud-based services, and advice on digital operations or digitalising operations, such as advice about digital tools to support business continuity and growth.
- Cyber security — cyber security systems, backup management and monitoring services.
Eligible expenditure is not necessarily limited to the categories listed above. A broad range of expenditures can qualify for the bonus deduction, provided all eligibility requirements are met.
This is good news for Hospitality businesses which increasingly use apps to:
- Order from the table (eg. me&u, Lightspeed…)
- Track staff hours (eg. Deputy)
- Process superannuation, payroll and accounting (eg. Xero),
- Take bookings (eg. Now Book it, Open Table, Resy….),
- Process receipts and invoices (eg. Dext)
- POS systems (there are many of these – Zeller, Tyro, Square, Lightspeed…)
Website design and digital marketing costs (mailout software, Instagram boosts etc.) are also included.
These deductions are available for expenses incurred from 29 March 2022 (budget night) to 30 June 2023. There is a cap of $20,000 per business per year, which translates to $100,000 of eligible expenses. As the bonus deduction is available in 2 financial years, an overall maximum bonus deduction of $40,000 is available.
Special rules apply for depreciable assets.
The below items are not eligible expenses even if they otherwise meet the requirements:
- Salary and wage costs
- Capital works which can be deducted under ITAA 1997 Div 43
- Financing costs
- Training and education costs, and
- Expenditure that forms part of the trading stock of the business.
Please note. You do not need to increase the expense in Xero by 20%, just record the expenses as usual and your accountant will adjust for it in your tax return.
Speak with your accountant to find out what they need from you to make the most of the Small business technology boost!
This information was kindly provided by Sophie Ramsay from Flow Accounting
Sophie worked in London for 6 years as a performance analyst for a number of top-tier investment banking firms. Upon returning to Australia, she took employment again as an analyst combined with business lending where she was alerted to the cash flow issues affecting many Australian businesses. She founded FLOW Accounting in 2010.