ato logo
Search Suggestion:

Small business skills and training boost

Check if you can claim a 20% bonus deduction on certain eligible training expenditure for your employees.

Last updated 19 September 2024

About the boost

Small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction for external training courses delivered to employees by registered training providers.

The boost applies to eligible expenditure incurred from 7:30 pm AEDT on 29 March 2022 until 30 June 2024.

Eligibility

To access the small business skills and training boost, your business needs to meet the standard aggregated annual turnover rules (with an increased $50 million threshold).

The expenditure must be:

  • for the provision of training to employees of your business, either in-person in Australia, or online
  • charged, directly or indirectly, by a registered external training provider that is not you or an associate of yours
  • already deductible for your business under taxation law
  • incurred within a specified period (between 7:30 pm AEDT or by legal time in the ACT on 29 March 2022 and 30 June 2024).

Where the training is a component of a larger program or course of training, the enrolment or arrangement relating to the relevant expenditure must be made or entered into at or after 7:30 pm (by legal time in the ACT) on 29 March 2022.

Find out if you are eligible for the Small business technology investment boost.

What you can claim

The bonus deduction is available for expenditure for the provision of training to one or more employees of your business. The training provider must meet certain registration criteria for the bonus deduction.

You can check for registered providers at:

Training expenses can include incidental costs related to the provision of training, provided they are charged by the registered training provider, such as the cost of books or equipment needed for the course.

If your business is registered for GST and the training is not GST-free, the bonus deduction is calculated on the GST exclusive amount plus any GST you cannot claim as a GST credit in carrying on your business.

Where deductions are to be claimed over time such as for capital deductions, the bonus deduction is calculated as 20% of the full amount of the eligible expenditure. It can be claimed upfront in the first income year in which the bonus deduction is available.

There may be fringe benefits tax (FBT) consequences associated with the expenditure you incur.

What you can't claim

You can't claim expenditure for:

  • training of non-employee business owners such as sole traders, partners in a partnership or independent contractors
  • costs added on an invoice by an intermediary on top of the cost of training, such as commissions or fees, as they are not charged directly or indirectly by the registered training provider.

Research and development tax incentive

If your business is entitled to a research and development (R&D) notional deduction under the R&D tax incentive program, you are only entitled to the notional R&D deduction and not a deduction under other taxation law. Your bonus deduction is still claimed based on what that other deduction would have been.

You can claim both the bonus deduction and the R&D notional deduction. The bonus deduction will not affect the amount of the R&D notional deduction. The R&D notional deduction amount is the actual expenditure amount, not the expenditure amount and the bonus deduction amount.

Not-for-profit organisations

A taxable not-for profit organisation can claim the boost in their company tax return if they meet the following requirements:

  • eligibility (small business with an aggregated annual turnover of less than $50 million), and
  • eligible expenditure.

A taxable not-for-profit is not exempt from income tax. You are required to lodge a tax return each year or notify a return not necessary.

When you can claim

You generally claim a deduction in the year the expenses are incurred. Under the delayed claim rule, you may have to claim a deduction for the eligible expense in your tax return for the income year in which you incurred it and claim the 20% bonus amount in a later year’s tax return. This generally depends on:

  • when your income year runs, so whether your business is an early, normal or late balancer
  • at what time during your income year you incur the expense.

Normal, early or late balancers

An entity's income year is usually the 12–month period ending on 30 June. We refer to these entities as 'normal balancers'. For example, their income year is 1 July 2023 to 30 June 2024.

When an entity is allowed to adopt a substituted accounting period (SAP):

  • where the last day of its income year falls between 1 July and 30 November, the SAP is in lieu of the income year ending on the preceding 30 June – this is a late balancer
  • where the last day of its income year falls between 1 December and 31 May the period adopted is in lieu of the income year ending on the succeeding 30 June – this is an early balancer.

The following special rules apply only to claiming the bonus deduction. The rules do not affect the existing general deduction under taxation law.

Normal balancers

For most businesses who are normal balancers, for eligible expenditure incurred between 7:30 pm AEDT 29 March 2022 and 30 June 2022, you:

  • claim the 100% deduction for this period in your 2021–22 tax return
  • claim the 20% bonus incurred in this period in your 2022–23 tax return.

For eligible expenditure incurred between 1 July 2022 and 30 June 2023 (2022–23 income year) you claim both the 100% deduction for the expenditure and the 20% bonus deduction in your 2022–23 tax return.

For eligible expenditure incurred between 1 July 2023 and 30 June 2024 (2023–24 income year) you claim both the 100% deduction for the expenditure and the 20% bonus deduction in your 2023–24 tax return.

Example: claiming the boost deduction as a normal balancer

B Co Pty Ltd (B Co) is a small business entity. It operates on an income year that begins on 1 July and ends on 30 June the following year (a normal balancer).

On 4 May 2022, B Co pays $1,000 (GST exclusive) for an employee to undertake training. The full $1,000 is deductible under the existing tax law as a business operating expense. As B Co meets all the criteria for the bonus deduction, the bonus deduction will be calculated as 20% of $1,000. That is, $200.

The cost of training ($1,000) should be claimed as a general deduction in B Co's 2022 tax return because this is the income year in which the expenditure is incurred.

As the training costs were incurred between 7:30 pm (by legal time in the ACT) on 29 March 2022 and the end of B Co's 2022–23 income year, the bonus deduction ($200) should be claimed in B Co's 2022–23 tax return. This is a result of the delayed claiming rules.

One year later, on 4 May 2023, B Co pays $3,000 (GST inclusive) for 3 new employees to undertake the same training. The full $3,000 is deductible as a business operating expense. Provided B Co meets the other eligibility criteria for the boost, the bonus deduction is 20% of $3,000. That is $600.

The training cost ($3,000) will be claimed as a general deduction in B Co's 2022–23 tax return because this is the income year in which the expenditure is incurred. The bonus deduction ($600) should also be claimed in B Co's 2022–23 tax return.

Therefore, B Co will claim:

  • 1,000 in its 2021–22 tax return
  • $3,800 in its 2022–23 tax return. This is made up of the general deduction for the cost of training incurred on 4 May 2023 ($3,000), as well the bonus deductions for expenditure incurred on 4 May 2022 ($200) and 4 May 2023 ($600).
End of example

Late balancers

For late balancers who incur expenditure between 7:30 pm AEDT 29 March 2022 and the end of your 2021–22 income year, you:

  • claim the 100% deduction for this period in your 2021–22 tax return
  • claim the bonus 20% incurred in this period in your 2022–23 tax return.

For eligible expenditure incurred in your 2022–23 income year, you claim both the 100% deduction for the expenditure and the 20% bonus deduction in your 2022–23 tax return.

For eligible expenditure incurred between start of your 2023–24 income year and 30 June 2024, you claim both the 100% deduction for the expenditure and the 20% bonus deduction in your 2023–24 tax return.

Example: claiming the boost deduction as a late balancer

Green Gracey Pty Ltd (Green Gracey) is a small business entity that operates a café serving food and beverages. Green Gracey operates on an income year that begins on 1 August and ends on 31 July the following calendar year.

On 4 May 2022, Green Gracey pays $1,000 (GST exclusive) for its employees to undertake safe food handling training. The full $1,000 is deductible as a business operating expense. Assuming other eligibility criteria for the bonus deduction are satisfied, the bonus deduction will be calculated as 20% of $1,000. That is, $200.

The cost of training ($1,000) should be claimed as a general deduction in Green Gracey’s 2021–22 tax return because this is the income year in which the expenditure was incurred.

As the training costs were incurred between 29 March 2022 and the end of Green Gracey’s 2021–22 income year (ending 31 July 2022), under the relevant special rules for initial bonus deductions, the bonus deduction ($200) should be claimed in Green Gracey’s 2022–23 tax return. This results in a delayed claim, where a bonus deduction is claimed in the year following the year in which expenditure was incurred.

One year later, on 4 May 2023, Green Gracey pays $300 (GST exclusive) for 3 new employees to undertake the same safe food handling training. The full $300 is deductible as a business operating expense. The bonus deduction will be calculated as 20% of $300. That is, $60.

The cost of training ($300) should be claimed as a general deduction in Green Gracey’s 2022–23 tax return because this is the income year in which the expenditure was incurred.

As the training costs were incurred in Green Gracey’s 2022–23 income year (ending 31 July 2023), under the relevant special rules for initial bonus deductions, the bonus deduction ($60) should also be claimed in Green Gracey’s 2022–23 tax return. This results in an outcome consistent with the general rule that deductions are claimed in year in which expenditure is incurred.

On 4 May 2024, Green Gracey pays $600 (GST exclusive) for three junior employees to undertake barista training. The full $600 is deductible as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction will be calculated as 20% of $600. That is, $120.

The cost of training ($600) should be claimed as a general deduction in Green Gracey’s 2023–24 tax return because this is the income year in which the expenditure was incurred.

Expenditure in the 2023–24 income year is covered by the later bonus deduction provision. As the costs were incurred in Green Gracey’s 2023–24 income year and before 30 June 2024, the bonus deduction should be claimed in Green Gracey’s 2023–24 tax return in accordance with the later bonus deduction provision. This results in an outcome consistent with the general rule that deductions are claimed in year in which expenditure is incurred.

Green Gracey will therefore claim the following amounts:

  • $1,000 in its 2021–22 tax return. This is the general deduction for the cost of training incurred on 4 May 2022
  • $560 in its 2022–23 tax return. This is made up of the general deduction for the cost of training incurred on 4 May 2023 ($300), as well as the bonus deductions for expenditure incurred on 4 May 2022 ($200) and 4 May 2023 ($60)
  • $720 in its 2023–24 tax return. This is made up of the general deduction ($600) and the bonus deduction for the expenditure incurred on 4 May 2024 ($120).
End of example

Early balancers

For early balancers who incurred eligible expenditure between 7:30 pm AEDT 29 March 2022 and the end of your 2021–22 income year, you:

  • claim the 100% deduction for this period in your 2021–22 tax return
  • claim the 20% bonus incurred in this period in your 2023–24 tax return.

For eligible expenditure incurred in your:

  • 2022–23 income year, you deduct the 100% deduction in your 2022–23 tax return and the 20% bonus deduction in your 2023–24 tax return
  • 2023–24 income year, you deduct both the 100% deduction and the 20% bonus deduction in your 2023–24 tax return
  • 2024–25 income year (up until 30 June 2024), you deduct both the 100% deduction and the 20% bonus deduction in your 2024–25 tax return.
Example: claiming the boost deduction as an early balancer

Cockablue Pets operates on an income year that begins on 1 January and ends on 31 December of the same calendar year (an early balancer). Its 2022–23 income year starts on 1 January 2022.

Cockablue Pets decide to expand their services to also offer dog grooming services. On 28 July 2022 they pay $14,000 (GST exclusive) for 2 of their employees to undertake specialised pet grooming training. The full $14,000 is deductible as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction will be calculated as 20% of $14,000. That is, $2,800.

The cost of training ($14,000) should be claimed as a general deduction in Cockablue Pets’ 2022–23 tax return because this is the income year in which the expenditure was incurred.

As the costs were incurred between 29 March 2022 and the end of Cockablue Pets’ 2022–23 income year (ending 31 December 2022), the bonus deduction ($2,800) should be claimed in Cockablue Pets’ 2023–24 tax return in accordance with the special rule for early balancers. This results in a delayed claim, where a bonus deduction is claimed in the year following the year in which the expenditure was incurred.

Cockablue Pets experiences a lot of demand for their new pet grooming services. In response to this demand, they hire 3 new employees in March 2023. The new employees have experience in animal care but no qualifications in pet grooming. Due to the demand for pet grooming services, On 10 April 2023, Cockablue Pets pays $21,000 (GST exclusive) for their new employees to also undertake the specialised pet grooming training. The full $21,000 is deductible as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction will be calculated as 20% of $21,000. That is, $4,200.

The cost of training ($21,000) should be claimed as a general deduction in Cockablue Pets’ 2023–24 tax return because this is the income year in which the expenditure was incurred.

The bonus deduction ($4,200) should also be claimed in their 2023–24 tax return. As the costs were incurred in Cockablue Pets’ 2023–24 income year (ending 31 December 2023), the bonus deduction should be claimed in Cockablue Pets’ 2023–24 tax return in accordance with the special rule for early balancers.

Cockablue Pets opens a new combined veterinary clinic and dog grooming location in March 2024. As a result, they hire 2 new junior employees who have limited experience in professional animal care but a desire to build a long-term career in the industry. On 8 April 2024 Cockablue Pets pays $6,000 (GST exclusive) for their new employees at the new clinic to undertake training in animal care. The full $6,000 is deductible as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction will be calculated as 20% of $6,000. That is, $1,200.

The cost of training ($6,000) should be claimed as a general deduction in Cockablue Pets’ 2024–25 tax return because this is the income year in which the expenditure was incurred.

Expenditure in the 2024–25 income year is covered by the later bonus deduction provision. As the costs were incurred in Cockablue Pets’ 2024–25 income year and before 30 June 2024, the bonus deduction ($1,200) should be claimed in Cockablue Pets’ 2024–25 tax return in accordance with the later bonus deduction provision. This results in an outcome consistent with the general rule that deductions are claimed in year in which expenditure is incurred.

This means that Cockablue Pets will claim the following amounts:

  • $14,000 in its 2022–23 tax return. This is the general deduction for the cost of training incurred on 28 July 2022
  • $28,000 in its 2023–24 tax return. This is made up of the general deduction for the cost of training incur red on 10 April 2023 ($21,000), as well as the bonus deductions for expenditures incurred on 28 July 2022 ($2,800) and 10 April 2023 ($4,200).
  • $7,200 in its 2024–25 tax return. This is made up of the general deduction and the bonus deduction for the expenditure incurred on 8 April 2024.
End of example

Examples to calculate the value

The following examples will help you calculate the value of the boost as a bonus deduction or reimbursement.

Example: calculating the boost for external training

Cockablue Pets Pty Ltd is a small business entity that operates a veterinary centre. The business takes on a new employee to assist with jobs across the centre. The employee has some prior experience in animal studies and is keen to upskill to become a veterinary nurse.

The business pays $3,500 (GST exclusive) for the employee to undertake external training. The bonus deduction is calculated as 20% of 100% of the amount of expenditure that can be deducted under another provision of the taxation law. In this case, the full $3,500 is deductible as a business operating expense. Assuming the other eligibility criteria for the bonus deduction are satisfied, the bonus deduction is calculated as 20% of $3,500. That is, $700.

The business also pays $4,400 (GST inclusive) for 2 of its employees to attend an external training session. Cockablue Pets is registered for GST and entitled to claim $400 as a GST credit in their BAS. The eligible expenditure for the small business skills and training boost is the amount of expenditure less the GST amount claimed as an input tax credit ($4,000). The bonus deduction is calculated as 20% of $4,000, which is $800.

End of example

Example: calculating the boost for employee and owner

Fix-A-Pipe is a small business running plumbing services. The business pays $2,000 (GST exclusive) for the owner Terry and one of its employees to take some training courses. Terry's training course costs $800 and the employee's training course costs $1,200.

The bonus deduction is available to eligible small businesses that incur expenditure for training employees. As Terry is the owner of the business and not an employee, the business must apportion the training costs for calculating the bonus deduction. The bonus is calculated as 20% of $1,200, which is $240.

As part of the employee's training course, Fix-A-Pipe is also charged by the training provider for the cost of books and material and some practice equipment used in the course ($88 GST inclusive). Those incidental costs are also eligible expenditure for the bonus deduction as they're directly charged by the training provider.

Fix-A-Pipe is registered for GST and can claim 1/11 of $88 (being $8) as a GST input tax credit. Therefore, they will calculate the bonus as 20% of $80, which is $16.

End of example

Example: calculating the boost for a university course

D Co Pty Ltd is an accounting firm. It has been paying directly to a university since February 2021 for an employee to complete an accounting course. The employee enrolled in subjects on 1 February 2022 and 15 July 2022. Enrolments into courses or classes within the period of 29 March 2022 to 30 June 2024 will result in the expenditure on those courses being eligible for the bonus deduction, provided that the other criteria are met, including that the small business incurs the expenditure within the same period. The broader degree enrolment prior to 29 March 2022 does not preclude this outcome. Therefore, the expenditure incurred in relation to the employee's enrolment on 15 July 2022 is eligible for the bonus deduction, whereas the enrolment on 1 February 2022 is ineligible.

End of example

Example: reimbursement payment to employee

Bill is an employee of an IT company. His employer supports staff taking training courses of their selection and agrees to reimburse the payment to them. In January 2022, Bill enrols for term 1 in a TAFE Advanced developer course to further upskill his knowledge. He pays $500 (GST exclusive) for term 1 and is reimbursed by his employer the following month. In term 2 starting in April 2022, he pays $500 (GST exclusive) again and is again reimbursed by his employer the following month.

The payment for term 1 was incurred prior to 29 March 2022 so it is not eligible for the bonus deduction. The payment for term 2 was incurred between 29 March 2022 and 30 June 2024 and charged indirectly by the provider of the training through reimbursing the employee the tuition fees. Therefore, the expenditure is eligible for the bonus deduction, provided the other criteria are met. The bonus deduction is calculated as 20% of $500, which is $100.

End of example

How to claim the bonus deduction

To correctly claim the 20% bonus deduction in your tax return, see:

Return to top

QC72899