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The revived 120 per cent tax deduction scheme should cast its net more widely, said IPA submission.
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Sole traders, contractors ‘should qualify for skills and tech boosts’
21 September 2022
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10 minute read
A bonus 20 per cent tax deduction for spending on technology or training by small business needs changes to the draft legislation to make more effective, according to an IPA submission.
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General manager Tony Greco said sole traders, partners in a partnership, and independent contractors were currently excluded from accessing the skills and training boosts and this should change.
As drafted, the legislation makes the bonus deduction only available for spending on external training for the employees of small businesses.
“This condition discriminates against sole traders and individual partners in a partnership, and independent contractors who spend money upskilling themselves and precludes them from being able to claim the bonus deduction,” said Mr Greco.
“If the policy intent is to enhance skills so those trained can contribute to the growth of the business, why should this be confined only to those businesses that employ staff?”
The IPA also wanted to see the legislation altered so that certain training providers such as professional trade associations were not excluded.
“Limiting the pool of providers of training and education to registered entities limits the policy outcomes,” said Mr Greco.
“Professional trade associations have CPD requirements for membership and provide important skills training for upskilling existing staff or training new staff.
“There is limited exposure to integrity risks associated with related party dealings if such associations were included as part of registered providers.”
In its submission the IPA also said that the government needed to ensure the legislation for the boosts was easy to interpret and implement as tax practitioners would be the ones needing to help business owners understand them.
“Given their temporary nature, the legislation needs to be well designed to minimise complexity and be capable of being administered practically,” said the submission.
“Businesses and their advisers will need to understand the eligibility criteria for these tax concessions that will have a relatively short shelf-life so there is a cost associated with its administration which will be borne mostly by tax practitioners.”
So to be eligible for the technology boost, the exposure draft said deduction expenditure had to be incurred wholly or substantially for an entity’s digital operations, but failed to provide any examples.
“Given that this is the key eligibility prerequisite, more guidance would be useful,” said Mr Greco.
In its submission the IPA also supported the measures being made permanent for businesses with less than $2 million in turnover, with the current eligibility criteria set at aggregated annual turnover of less than $50 million.
“These small entities would benefit from incentives that enhance the skills of their employees to contribute to the growth of the small business on an ongoing basis,” said Mr Greco.
“If there is any opportunity to reduce the turnover eligibility threshold for this measure to ensure it continues beyond 30 June 2024, we would be supportive of any such proposal.”
However, the submission was broadly supportive of the initiatives that encourage small businesses to train staff and embrace digital technology.
“The support for digital adoption and upskilling and training of employees by small businesses through the provision of a bonus 20 per cent tax deduction for eligible expenditure is something that the IPA has been in support of and has advocated for previously,” said the submission.
The deadline for submissions on the draft legislation ended on Monday (19 September).
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