The Government recently announced tax breaks for small businesses that spend big on digital technology. We speak with one small business owner about how much they’ll be spending, and explore what the deductions could mean for your business.
At a glance
- The recent Federal Budget allowed 120% tax deductions for small business spending on eligible digital technologies.
- Business owner Sharon Melamed plans to make use of the opportunity to boost her B2B services company Matchboard.
- She predicts a benefit to cash flow as a result of investing in technologies that boost her business’s SEO and website performance.
One of the key take-outs for small businesses from this year’s Federal Budget is the potential to invest in digital technology and benefit from a handy tax deduction.
In his Budget speech, Treasurer Josh Frydenberg said that for every $100 small businesses spent on digital technologies such as einvoicing, cybersecurity and web design, they would receive a $120 deduction come tax time. Small businesses with an annual turnover of less than $50 million could claim the deduction for expenditure up to $100,000 incurred from Budget night 29 March 2022 until 30 June 2023.
This complements a similar initiative from the Victorian Government as part of its Small Business Digital Adaptation Program, which allows businesses that purchase one of 14 nominated digital tools access to a rebate of $1,200. The product must be purchased from the supplier by 18 July 2022, or before the program’s funds are exhausted, whichever comes first.
Both schemes represent an opportunity for businesses to better invest in the tools, tech and training necessary for operating in a digital and remote-first economy.
Matchboard is a B2B supplier sourcing platform that connects businesses with suppliers and vice versa via an online platform. We spoke to Matchboard Founder and Managing Director Sharon Melamed to learn how she plans to take advantage of these deductions to boost digital capability.
How Matchboard will make the most of tax deductions
Although full details of the scheme are yet to be announced, Sharon predicts clear benefits for her business’s cash flow.
“Within the broad definitions outlined, I’d absolutely be looking to take advantage of the incentive,” she says. “In my calculation, the bottom-line savings after tax will be five per cent. I’ll be putting this straight into additional digital investment. We’ll probably spend an extra $10,000 in the next 12 months.”
With Matchboard’s key business proposition squarely in the sights of the scheme, Sharon’s looking to maintain the business’s cloud solutions and direct extra spending to SEO and digital platform improvements.
“Our business has around 10 cloud subscriptions to platforms including Mailchimp and Xero,” she says. “We would probably increase our spend on SEO, as ranking near the top of Google search results has just become an intensely competitive field. We’d also look to make some website enhancements.
“Digital is core to our business, and the Government’s new deductions are encouraging us to invest more than we would have otherwise.”
Current challenges and future opportunities
It can be a challenge to balance investment in digital technology with the many other regular expenses faced by small businesses, but for Sharon these deductions have come along at an opportune moment.
“Keeping up with ever-changing Google algorithms is the top challenge. As an online business, we can’t afford to drop the ball, as SEO accounts for half our website traffic. The problem is that every year it becomes more competitive and more complex, which means the required investment to stay near the top of Google search results keeps going up and up.”
By overcoming this challenge, Sharon expects a marked return on investment for Matchboard.
She also expects payoffs in terms of both decreased costs and increased revenues based on the continued investment in other digital technologies and the innovation these tools have spurred for the Matchboard team.
“We expect a strong productivity impact with the launch of our customer relationship management (CRM) tool in June. Moving away from spreadsheets was long overdue,” says Sharon.
“Implementing Zoom has been amazing, as it has prompted us to launch an online executive roundtable concept where we match a supplier to a virtual room full of buyers. This has resulted in a triple-digit uplift in revenues from online events.”
With Prospa’s fast application and decision, this time tomorrow you could have the funds you need to set your business up for success. Find out more.