In the case of the first, being able to depreciate $1 million worth of software over three years instead of the current five years would allow them to increase their annual deduction from $200,000 to $333,333.
Australian businesses spent more on software during 2020 than in any other year on record, highlighting how the COVID-19 crisis forced companies to adapt to a rapidly digitalise world.
All up, $18.4 billion was spent on software including both purchased and in-house products, according to the Bureau of Statistics. This was up from $18 billion in calendar 2019, $17 billion in 2018 and $15.75 billion in 2017.
Unpublished data from the Australian Tax Office shows about 25,000 businesses claimed deductions worth about $75 billion in the five-year period from the beginning of 2016-17 to the end of 2020-21.
But Technology Council of Australia chief executive Kate Pounder said local firms still tended to lag global peers for investing in intangibles assets.
According to Accenture research, for example, Australian companies invested 30 per cent less in ICT than their Canadian counterparts.
“Intangibles are making up an increasing share of business investment,” Ms Pounder said. “We’re keen to see the details of the changes on Friday and work with the government to ensure it achieves the right outcomes given there’s a variety of different business models for software.”
The changes will not adopt calls from business groups for depreciation rules to cover cloud-based software, which is now considered an expense.
The BCA is pushing the government to change the way it thinks about digital services as an asset.
“We want to make sure tax settings recognise digital investment in the same way as a physical one,” Business Council of Australia president Tim Reed said this year.
