Bonus deduction for Skills and Training expenditure

As a result of a recent legislative change, businesses which meet certain conditions will temporarily be able to claim an extra 20% deduction in addition to an existing available deduction on eligible expenditure relating to external work-related training for employees.

For example, where a business has expenditure of $1,000 on staff training, it may now be in a position to claim a $1,200 deduction.  This reflects the usual deductible amount of $1,000 and the additional 20% bonus deduction of $200.

This legislative measure was only passed into law as of 23 June 2023.  However, it can apply to expenditure that has been incurred between 7.30pm Australian Eastern Standard Time (AEST) on 29 March 2022 and 30 June 2024.

Given that the 30 June 2022 income year is well and truly behind us, there are special measures that allow for the bonus deduction relating to the 30 June 2022 income year to be claimed as a deduction in tax returns for the 30 June 2023 income year.

Conditions to claim the bonus deduction

Aside from the timing requirements, there are further specific conditions that need to be met to claim this bonus deduction.

The bonus deduction is only available to eligible small businesses.   The definition of “small business” applied in this context is generous, as it extends to businesses with an annual turnover of less than $50 million.

The other criteria are as follows:

• the expenditure must be for training employees, either in-person in Australia, or online;
• the expenditure must be charged, directly or indirectly, by a registered training provider;
• the registered training provider must not be the small business claiming the deduction or a related party of the small business;
• the expenditure must already be deductible under the taxation law; and
• the expenditure must be for the provision of training, where the enrolment or arrangement for the provision of the training occurs on or after 7.30pm AEST on 29 March 2022.

Registration requirements of training providers

The most stringent of the above conditions to access the bonus deduction is that the training provider needs to be registered with at least one of the following four government agencies:

• Tertiary Education Quality and Standards Agency;
• Australian Skills Quality Authority;
• Victorian Registration and Qualifications Authority; or
• Training Accreditation Council of Western Australia.

In many instances, expenditure that is commonly booked to a general ledger account called “staff training” or something similar, is not in relation to training offered by a provider registered with one of these four government agencies.  This has no bearing on whether the underlying training expenditure is deductible.  However, it is of significance as to whether the bonus deduction can be claimed.

Speak to the tax and financial experts

LDB Group offers a team of experts in the Australian tax environment. Contact us today to discuss how we can assist you with claiming a bonus deduction for training expenditure.

Call (03) 9875 2900 or fill in the contact form.