As part of its strategy to address the current skills shortage and future-proof Australia’s workforce by building better trained and more productive workers, the Federal Government has proposed to implement a temporary “skills and training boost” initiative. This initiative proposes to give small businesses access to a bonus deduction equal to 20% of eligible expenditure on certain training for employees, both existing and new, between 29 March 2022 and 30 June 2024.

The bonus deduction would be available to all entities that meet the definition of a small business entity (ie those with an aggregated annual turnover of less than $50 million) in the income year in which the eligible expenditure is incurred.

Under the proposed measure, eligible expenditure would need to satisfy a range of criteria, including that the money must be spent with a registered training provider on training employees (either in-person in Australia, or online) and it must be an expense already deductible under taxation law and incurred within the specified period.

This initiative is only intended to cover employees, so the bonus deduction would not be available for training non-employee business owners, such as sole traders, partners in a partnership and independent contractors who are not employees of the business within the ordinary meaning. The costs of in-house or on-the-job training would not be eligible for the bonus deduction. According to the government, this is because the bonus deduction is not intended to cover general business operating costs.

This proposal is currently in the draft stage and undergoing consultation, and as such the bonus deduction will not be available until the measure becomes law.