$1.55 billion in SME tax breaks pass in Senate, clearing path for major bonus deductions

Small business tax breaks valued at $1.55 billion have passed in the Senate, clearing the way for enterprises nationwide to claim up to $20,000 in bonus deductions this tax season.

The Senate voted in favour of the Treasury Laws Amendment (2022 Measures No. 4) Bill 2022 on Wednesday morning, approving the omnibus bill with a number of amendments.

The bill will return to the House of Representatives for a final tick-off before being presented for assent into law.

The package contains both the Skills and Training Boost and Technology Boost, twin policies which promise 20% ‘bonus’ tax breaks to small businesses investing in their personnel and tech upgrades.

The Technology Investment Boost, first introduced in March 2022 by the former Morrison government, offers small businesses a bonus 20% tax deduction on depreciable assets and subscriptions designed to improve their digital effectiveness.

Similarly, the Skills and Training Boost covers upskilling courses for staff, in the hopes of improving workplace efficiency and productivity through prolonged skills shortages.

Both policies cover expenditure of up to $100,000, providing effective bonus deductions of up to $20,000.

Under the legislation passed by the Senate, small businesses can claim relevant training costs until June 30, 2024.

However, the Technology Boost only covers upgrades bought before June 30 this year, meaning the Upper House passed the bill with only days to go before its nominal cut-off date.

Attempts to expand funding scope fail in Senate

While the bill passing in the Senate will provide a level of certainty to small businesses planning to claim bonus deductions on their 2023 tax returns, two amendments expanding the scope of those policies failed to gain a foothold.

Fearing that not enough small businesses have taken full advantage of the Technology Investment Boost, Independent Senator David Pocock proposed its extension to June 30, 2024, a move he said would allow more SMEs to upgrade their equipment and expand their digital capabilities.

“These are great measures for small businesses to help them digitise to drive genuine productivity among small businesses, but they have two weeks to make use of this funding,” Pocock told the Senate Tuesday night.

Despite the former Coalition government claiming the policy will deliver up to $1 billion in tax breaks to small businesses, Pocock said revised costing data from the Parliamentary Budget Office showed the real benefit will be closer to $600 million when it expires on June 30 this year.

Pocock’s amendment enjoyed support from the Coalition, with Senator James McGrath saying legislative delays have “had a chill on investment and left small business with enormous uncertainty about whether they can make these investments.”

Finance Minister Katy Gallagher disputed Pocock’s argument, saying the full benefit to SMEs won’t be known for some time, and that the government has initiated a raft of separate policies designed to assist small businesses through uncertain economic conditions.

The amendment was voted down 31-28 on Wednesday morning.

The Senate also voted down an amendment from Liberal Senator Andrew Bragg, which would have allowed small businesses to invest in training courses from providers missing from the bill’s approved accreditation list.

“The registration requirement is an important safeguard that supports the quality and integrity of the training provider,” Gallagher said Tuesday night.

“It ensures that training that is eligible for the Skills and Training Boost is delivered by providers that are regulated and meet rigorous government standards.”

That measure was voted down by a margin of 30-29.

The Senate voted to remove measures pertaining to deductible gift recipients from the broader omnibus bill.

Prolonged debate threatened Technology Investment Boost coverage

Despite those tax breaks enjoying bipartisan support, the prolonged debate over other measures in the broader bill threatened to derail the Technology Investment Boost entirely before its June 30 expiry.

The main roadblock was the government-led plan for new funding for the Clean Energy Finance Corporation, which the government hopes will support the commercialisation of renewable energy technologies, energy-efficient innovations, and other forward-thinking clean energy developments.

The measure will also enact the Rewiring the Nation plan, a multibillion-dollar initiative the federal government says will future-proof energy infrastructure and build renewable energy generation opportunities.

The Coalition is vehemently opposed to the Rewiring the Nation scheme as it stands, with Opposition Leader Peter Dutton last year describing it as a “pipe dream” that is “never going to be realised”.

Speaking in the Upper House on Tuesday afternoon, Liberal National Party Senator James McGrath said the small business measures could have been passed months ago were it not for the clean energy inclusions.

“At a time when businesses need certainty, this is a Labor government playing games,” McGrath said, accusing the Labor government of engaging in “classic wedge politics”.

Labor reportedly returned serve, with Treasurer Jim Chalmers declaring: “The Liberals claim to be the party of business, but won’t hesitate to sacrifice small businesses to score some cheap political points.”