In response to Treasury’s request for submissions on draft legislation to introduce “a Technology Investment Boost to help small businesses operate digitally”, auDA is pleased to offer the below comment.
auDA supports the policy intent, which is to support improved adoption of digital technologies by small businesses through a bonus 20 per cent tax deduction, in the period March 2022-June 2023.
Digital operations and digitising operations – eligible expenditure should include IAAS and SAAS.
The Explanatory Materials state that it is expenditure on ‘digital operations or digitising operations’ that will be eligible for the tax deduction, and that this may include but is not limited to:
…business expenditure on:
- digital enabling items – computer and telecommunications hardware and equipment, software, systems and services that form and facilitate the use of computer networks;
- digital media and marketing – audio and visual content that can be created, accessed, stored or viewed on digital devices; and
- e-commerce – supporting digitally ordered or platform enabled online transactions.
auDA submits that services broadly described as ‘software as a service’ or SAAS, or ‘infrastructure as a service’ or IAAS, should be covered by the deduction.
This is because in digitising the business operations of small businesses, modern practice has moved beyond direct installation of physical equipment in many cases. Examples of this include subscription services such as, for example, Xero for accounting services (see: https://xero.com/) or Amazon Web Services for cloud computing services (see: https://aws.amazon.com/).
auDA believes that the intent of the policy can best be achieved by ensuring such services can be included in the expenses eligible for the deduction. We have no comment on the current draft wording and appropriate guidance by the ATO.
Cyber security expenditure
Cyber security is an important element of digitising business operations in an appropriate manner. The threat landscape is particularly virulent at present, with Australians having lost over $336 million to scams in 2022 alone.
auDA’s research has found that small businesses are particularly concerned about cyber security yet under-invest in methods of prevention.
Without building security into the beginning of a digitisation effort, it is usually more expensive to do so later, and can result in vulnerabilities for the business or for customers that could otherwise have been avoided.
We recommend Treasury consider defining and including cyber security expenditure on services or hardware as part of the eligible expenditure, assuming this is not dealt with by other policy initiatives under way (e.g. the current revision of the Cyber Security Strategy announced by Ministers in August 2022).
We support the intent of this legislation.
We recommend that infrastructure-as-a-service and software-as-a-service expenditures are included as eligible expenditure.
We recommend Treasury consider including cyber security expenditure as eligible expenditure.