Tax & investment incentives for the digital economy

As part of its Digital Economy Strategy package, the Government has committed to new and expanded funding to invest in the growth of digital industries and the adoption of digital technologies by small businessInvestment and tax incentives

The Government has committed to a series of tax incentives to support digital technologies:

Digital games tax offset

A 30% refundable tax offset for eligible businesses that spend a minimum of $500,000 on qualifying Australian games expenditure. The Digital Games Tax Offset will be available from 1 July 2022 to Australian resident companies or foreign resident companies with a permanent establishment in Australia. Industry consultation will commence in mid-2021 to establish the eligibility criteria and definition of qualifying expenditure.

Self-assessment of the effective life of certain intangible assets

The income tax laws will be amended to allow taxpayers to self-assess the effective life of certain intangible assets, rather than being required to use the effective life currently prescribed by statute. The measure applies to assets acquired from 1 July 2023 (after the temporary full expensing regime has concluded) including patents, registered designs, copyrights, and in-house software for tax purposes. Taxpayers will be able to bring deductions forward if they self-assess the assets as having a shorter effective life to the statutory life.

Review of venture capital tax incentives

The effectiveness of the existing range of tax incentives designed to attract foreign investment and encourage venture capitalists to invest in early-stage Australian companies will be reviewed to ensure they are producing the intended results. This is code for the Government doesn’t think the money invested is achieving a genuine result and changes are likely to be recommended.

Emerging aviation technologies

The Government has committed $35.7m to support emerging aviation technologies, the bulk of which is committed to the Emerging Aviation Technology Partnerships (EATP) program. Partnering with industry, the program is focussed on:

    • growing manufacturing jobs in electric aviation
    • connecting regional communities
    • digital farming
    • boosting regional supply chains
    • improving health outcomes for remote Indigenous communities.

and is expected to include electric engines, drones and electric vertical take-off and landing aircraft.

Applications for EATP partners will be sought from local and international industry through a competitive application process in late 2021.

Artificial intelligence development

A package of measures to oversee and develop Australia’s use and integration of artificial intelligence (AI) including:

National AI centre

A new national AI centre to create the foundation for Australia’s AI and digital ecosystem within the CSIRO’s Data61. The centre will support projects that lift AI capability, provide a “front door” or SMEs looking for talent, and provide a central coordination for strategically aligned AI projects. Four Digital Capability Centres will be appointed through a competitive process focussing on specific applications of AI, such as robotics or AI assisted manufacturing. These Centres will provide SMEs with connections to AI equipment, tools and research, access to advice and training to help SMEs confidently adopt AI technologies, and links with the required AI expertise to identify business needs and connect them to leading researchers.

AI grant funding

Two grant funding programs (one national and one specifically for regional initiatives) for business to pilot AI projects that address key national challenges. Grantees will retain the intellectual property of their solution.

Expansion of small business digital support services

The Government has committed to:

    • A further $12.7m for the Digital Solutions – Australian Small Business Advisory Services Program that provides small businesses with access to digital solutions advisers to work with them to expand their use of digital technology. The Digital Solutions Program will pilot a program for the not-for-profit sector.
    • $15.3 m has been dedicated to drive electronic invoicing through the business community by working with payment providers, supply chain pilots, and education campaigns (E-invoicing will be mandatory for Government by July 2022). No direct incentives for adoption.

Click here to learn about other 2021 changes.