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The ATO specifies ongoing subscriptions for accounting programs as qualifying for the technology investment boost.
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Accounting software subs eligible for 20% bonus deduction
12 September 2023
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Ongoing subscriptions for accounting software qualify for a 20 per cent bonus tax deduction under the technology investment boost, the ATO has clarified.
The Tax Office said it was impossible to provide an “exhaustive list” of eligible expenditure under the scheme, but it was “intended to cover a wide range of business expenses and assets” incurred in digitising.
The scheme, announced in the final budget of the previous federal government in March last year, finally became law in June just before the deadline for expenditure on 30 June.
It allows small businesses – those with a turnover of less than $50 million – a 20 per cent bonus deduction on technology expenditure that “supports their digital operations and digitising their operations”.
The ATO acknowledged that it was a broad measure intended to cover a wide range of business expenses and assets but “your clients may have questions about what they can claim”.
“While we can’t provide an exhaustive list of eligible expenditure, a good indicator of eligibility is to consider if the small business would have incurred the expense if they didn’t operate digitally,” it said in an update yesterday.
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“That is, if they hadn’t sought to adopt digital technologies in the running of their business.”
“Using this rule of thumb, the costs below are eligible:
- Advice about digitising a business.
- Leasing digital equipment.
- Repairs and improvements to eligible assets that aren’t capital works.”
Eligibility depended on the purpose of the expenditure and its link to digitising the operations of a specific small business.
“For example, the cost of a multifunction printer would not be eligible if it were intended to only make copies of paper documents. However, it would be claimable if being used to convert paper documents for digital use and storage.”
“New and ongoing subscription costs can also qualify as eligible expenditure if it relates to your clients’ digital operations.
“For example, your clients’ ongoing subscription to an accounting software platform for their business would qualify. Likewise, a new subscription for digital content that is used in developing web content to advertise their business would be eligible.”
“In these cases, businesses should keep explanations of how the expenses relate to digitising their business, as well as accurate records of all their claims.”
The boost applied to eligible expenditures incurred between 7.30pm on 29 March 2022 and 30 June 2023, with a maximum bonus deduction of $20,000 per income year.
If the expenditure was on a depreciating asset, the asset had to be first used or installed ready for use by 30 June 2023.
A previous list of eligible items, published by the ATO in August, did not specify ongoing accounting software subscriptions.
The list included:
- 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 digitising operations, such as advice about digital tools to support business continuity and growth.
- Cyber security – cyber security systems, backup management and monitoring services.
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