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Appendix 16: Small business bonus deductions

Use Appendix 16 to help you work out if and when you can claim the small business bonus deductions.

Last updated 1 July 2024

Small business skills and training boost

The Treasury Laws Amendment (2022 Measures No. 4) Act 2023 provides for a temporary skills and training boost for small businesses in the form of a bonus deduction. Small businesses (with an aggregated annual turnover of less than $50 million) are able to claim the bonus deduction as an additional 20% deduction, on top of their ordinary deduction, for expenditure incurred for the provision of eligible external training courses to employees by eligible registered training providers in Australia.

It applies to eligible expenditure incurred from 7:30 pm (AEDT) on 29 March 2022 until 30 June 2024. Special rules provide for the income year in which the bonus deduction can be claimed.

How to complete the partnership tax return

You make the boost claim as an expense subtraction at item 5 Reconciliation items – label Expense reconciliation adjustments (using Worksheet 1).

You also record the amount at item 52 Small business bonus deductions.

Don't include at those labels the ordinary deduction for expenditure on your skills and training.

The bonus deduction is an additional tax deduction of 20%, on top of the ordinary deduction, for the cost of eligible training expenditure incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2024.

It applies to enrolments or arrangements for the provision of training made or entered into at or after 7:30 pm AEDT on 29 March 2022.

Criteria for claiming the bonus deduction

You must also meet the following criteria for the bonus deduction:

  • expenditure must be for training employees, in-person in Australia or online
  • expenditure must be charged, directly or indirectly, by a registered training provider and be for training within the scope of the provider's registration
  • the eligible registered training provider must not be the small business or an associate of the small business, for example, a related entity or individual or a relative, spouse, or partner of a related individual
  • expenditure must already be deductible under the tax law.

Expenditure for training persons other than employees is not eligible for the bonus deduction. For example, contractors and partner of a partnership are not eligible for the bonus deduction.

When to claim the bonus deduction

The ordinary deduction is claimable in the income year in which the expense is incurred. However, special rules apply in claiming the bonus deduction. When you claim also depends on the balancing date if the small business has a substituted accounting period.

Normal balancers

For eligible expenditure incurred between 1 July 2023 and 30 June 2024, you claim the bonus deduction in your 2023–24 tax return.

Late balancers

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

Early balancers

For eligible expenditure incurred in your 2023–24 income year, you claim the bonus deduction in your 2023-24 tax return.

For eligible expenditure incurred in your 2024–25 income year (up until 30 June 2024), you claim the bonus deduction in your 2024–25 tax return.

Steps to complete item 5 and 52

Step 1 Show your bonus deduction for the small business skills and training boost in respect of your primary production business at row x in Worksheet 1 in the primary production column.

Step 2 Show your bonus deduction for the small business skills and training boost in respect of your non-primary production business at row x in Worksheet 1 in the non-primary production column.

Step 3 Add up your primary production and non-primary production at row x in Worksheet 1.

Step 4 Transfer the amounts at row x in Worksheet 1 to item 5 Expense reconciliation adjustments (expense subtractions). Also record this amount at item 52 – label A. Don't show cents.

Small business energy incentive

The small business energy incentive provides businesses with an aggregated annual turnover of less than $50 million with access to a temporary bonus deduction equal to 20% of the cost of eligible assets or improvements to existing assets that support more efficient energy use.

The bonus deduction applies to the cost of eligible assets and improvements up to a maximum amount of $100,000, with the maximum bonus deduction being $20,000.

The bonus deduction is in addition to a deduction you would ordinarily have access to under tax law.

How to complete the partnership tax return

You claim the bonus deductions as an expense subtraction at item 5 Reconciliation items, Expense reconciliation adjustments (using worksheet 1).

You also record the amount at item 52 Small business bonus deductions.

Don't include the total energy incentive expenditure amount at these labels for which you claim an ordinary deduction.

Criteria for claiming the small business energy incentive

You must meet the following criteria for the bonus deduction:

  • Your business needs to meet the aggregated annual turnover rules (with an increased $50 million threshold).
  • The expenditure being claimed must be deductible to your business under other provisions in the taxation law.
  • For expenditure on eligible assets, the asset must be both first used or installed ready for use for any purpose, and used or installed ready for use for a taxable purpose, between 1 July 2023 and 30 June 2024.
  • For expenditure on eligible improvements to existing assets, the expenditure must be incurred between 1 July 2023 and 30 June 2024.
  • Neither the expenditure nor the asset is excluded.

You can't claim the bonus deduction for the cost of an eligible asset, or an improvement to an existing asset, if a balancing adjustment event occurs to the asset (for example, you sell it) during the income year in which you hold the asset and incur the expenditure, unless the balancing adjustment event is an involuntary disposal.

You calculate the bonus deduction as 20% of the cost of the eligible asset or improvement, irrespective of whether your ordinary deduction for the decline in value of the asset is claimed in one income year (under instant asset write off) or over its effective life.

Eligible assets

A depreciating asset may be eligible for the bonus deduction if it uses electricity and when one or more of the following apply:

  • there is a new reasonably comparable asset that uses a fossil fuel available in the market
  • the asset is more energy efficient than the asset it is replacing
  • if it is not a replacement, it is more energy efficient than a new reasonably comparable asset available in the market.

A depreciating asset may also be eligible if it is an energy storage, time-shifting or monitoring asset, or an asset that improves the energy efficiency of another asset.

Eligible improvements

An improvement to a depreciating asset may be eligible for the bonus deduction if it:

  • enables the asset to only use electricity, or energy that is generated from a renewable source, instead of a fossil fuel
  • enables the asset to be more energy efficient, provided that asset only uses electricity, or energy generated from a renewable source
  • facilitates the storage, time-shifting or usage monitoring of electricity, or energy generated from a renewable source (for example, a battery that stores electricity).

Excluded assets and expenditure

The following types of assets and expenditure are not eligible for the bonus deduction:

  • assets and expenditure on assets that can use a fossil fuel (except if that use is merely incidental such as where an asset uses an oil-based lubricant)
  • assets and expenditure on assets which have the sole or predominant purpose of generating electricity (such as solar panels)
  • capital works
  • motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles
  • assets and expenditure on assets allocated to software development pools
  • financing costs, including interest and borrowing expenses.

When the bonus deduction is claimed

For eligible expenditure on depreciating assets that are both:

  • first used or installed ready for use for any purpose between 1 July 2023 and 30 June 2024
  • used or installed ready for use for a taxable purpose between 1 July 2023 and 30 June 2024.

You will claim the bonus deduction for that expenditure in your tax return 2023–24.

For eligible expenditure on improvements to depreciating assets incurred between 1 July 2023 and 30 June 2024, you will also claim the bonus deduction for that expenditure in your tax return 2023–24.

An entity with a substituted accounting period may claim the bonus deduction across more than one income year, provided the eligible asset was first used or installed ready for use, or the improvement cost was incurred, between 1 July 2023 and 30 June 2024.

Steps to work out the amount to report at item 52

Step 1 Show your bonus deduction for the small business energy incentive in respect of your primary production business at row y in Worksheet 1 in the primary production column.

Step 2 Show your bonus deduction for the small business energy incentive in respect of your non-primary production business at row y in Worksheet 1 in the non-primary production column.

Step 3 Add up your primary production and non-primary production at row y in Worksheet 1.

Step 4 Transfer the amounts at row y in Worksheet 1 to item 5Expense reconciliation adjustments (expense subtractions). Also record this amount at item 52 – label C. Don't show cents.

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