Explained: The New 20% Tax Deduction For Real Estate Tech & Digital Investments
2 minute read

Tech upgrades and digital skills training emerged as key points of the 2022-2023 federal budget, thanks to two new tax deductions proposed by the Morrison government.

Small business owners (those with an annual turnover of less than $50 million) will receive up to $1 billion in tax breaks for digital spending, including upgrades to cybersecurity systems or online sales platforms, as the government pushes more firms to embrace the online economy.

Under changes announced in the recent budget, the government will allow eligible businesses to deduct $120 for every $100 they spend on services that support their digital capability, which could include spending on websites, cloud computing or cyber security systems.

Josh Frydenberg, MP – Source: Wikipedia

What’s on offer?

Treasurer Josh Frydenberg said the policies will offer “bonus” tax deductions to businesses that invest in new technology or external digital skills training for staff.

The policies offer a 20% deduction on eligible business expenses, on top of the deductions already available to SMEs come tax time.

“For every hundred dollars a small business spends on training their employees, they will get a $120 tax deduction,” Frydenberg told Parliament on budget night.

The Small Business Technology Investment Boost is open to businesses with an aggregated annual turnover of less than $50 million.

The government said spending of up to $100,000 a year would be eligible for the bonus deduction, and firms would be able to claim the tax break on purchases made between now and June 30, 2023.

What can I claim?

The Australian Taxation Office (ATO) gives a good idea of what small businesses are free to claim under the Technology Investment Boost. Business expenses and depreciating assets like “portable payment devices, cyber security systems or subscriptions to cloud-based services” are all covered, the ATO said.

Budget documents suggest SMEs will be free to claim the cost of new laptops and next-generation websites, encouraging small businesses to bolster their technological capacities.

Related: Harris Real Estate Launches ‘Next Generation’ Agency Website

When do these policies begin, and when do I claim?

Both policies came into effect as Frydenberg began his budget speech. The ATO website states that all relevant expenditure from 7.30pm AEDT on Tuesday 29 March 2022, can be claimed under the new schemes.

The tech package is set to last until June 30, 2023, while the training package will linger until June 30, 2024.

To claim the bonus on purchases made between budget night and the end of the 2021-2022 financial year, small businesses must first submit a normal expenditure claim. The bonus 20% will only be applied in the 2022-2023 financial year, the ATO has stated.

Eligible expenditure made in the 2022-2023 financial year is different. Small businesses will be free to “deduct the entire 120% in your 2022–23 tax return,” the ATO has said.

The 120% deduction will be available under the skills package in the 2023-2024 financial year, too.

What does Stepps have to do with any of this?

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