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Interaction between R&D Tax Incentive and Small Business Technology Investment Boost

September 18th, 2023

Under the recently enacted small business technology investment boost, small businesses with an aggregated annual turnover of less than $50 million will be allowed an additional 20% tax deduction to support their digital operations and digitise their operations.

The boost applies to eligible expenditure incurred between 7:30 pm AEDT on 29 March 2022 and 30 June 2023. The boost is for business expenses and depreciating assets and is capped at $100,000 of expenditure per income year. You can receive a maximum bonus deduction of $20,000 per income year.

As companies have been preparing FY23 tax returns, we have been fielding questions around the interaction between the R&D Tax Incentive and the small business technology investment boost.

The Explanatory Memorandum accompanying the law which passed the small business technology investment boost notes:

• Section 355-715 specifies that where a taxpayer is entitled to a notional deduction under the Research and Development Tax Incentive regime and another deduction under the tax law, then the taxpayer is only entitled to the notional Research and Development deduction, and not the other deduction. The notional Research and Development deduction is used to calculate a tax offset.
• 5.27 The deduction introduced by these amendments is a bonus deduction, where the same expenditure provides eligibility for the original deduction as well as the bonus deduction. Therefore, if expenditure is eligible for both the Research and Development Tax Incentive and the bonus deduction, the taxpayer may claim both the bonus deduction and the tax offset. The bonus deduction will not affect the amount of the tax offset.

The ATO Guidance accompanying the small business technology investment boost notes:

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.

Please get in touch with our office if you would like to speak to someone about a potential claim, or check out our website for more information.