Small Business energy incentive: Bonus tax deduction

If you run a business with an aggregated annual turnover of less than $50 million you will have access to a bonus 20% tax deduction with the small business energy incentive.

This applies to new assets, or improvements to existing assets, which support more efficient energy use. Eligible assets must be both first used or installed ready for use for any purpose and used or installed ready for use for a taxable purpose, between 1 July 2023 and 30 June 2024. Eligible improvement costs must also be incurred during this period to be eligible for the bonus deduction. 

Up to $100,000 of total expenditure is eligible under the incentive. The maximum bonus deduction is $20,000 per business. 

What you can't include or claim 

While this incentive covers a broad range of expenditure, it's important to know what you can't claim:  

• assets and expenditure on assets that can use a fossil fuel 
• assets and expenditure on assets that have the sole or predominant purpose of generating electricity (such as solar panels) 
• capital works 
• motor vehicles and expenditure on motor vehicles 
• expenditure allocated to software development pools  
• financing costs. 

What you can claim for

Expenditure eligible for the bonus deduction may include, but is not limited to, expenditure on:

• electrifying equipment (for example, installing a reverse cycle air conditioner in place of a gas heater)
• upgrading to more energy efficient appliances and equipment (for example, energy efficient refrigeration systems)
• installing time-shifting devices which allow electrical appliances to operate at off-peak times
• replacing a diesel engine with an electric motor
• installing a Virtual Power Plant enabled battery system.

Where the expenditure is partly for private purposes, the bonus deduction is worked out with reference to the business-related portion of that expenditure.

If your business is registered for GST and the expenditure is not GST-free, the bonus deduction is calculated on the amount of expenditure less the GST amount claimable as an input tax credit.

What you need to do 

When claiming the incentive, make sure you: 

• have good records that provide evidence of the expenditure you claim  
• can show and explain how you compared different assets when upgrading or making improvements  

How we can help

Seek advice from your local TaxAssist Accountant. They can help you to plan effectively to minimise your tax liabilities. Call us today on 0403 184 157 or use our online enquiry form.

 

Date published 19 Jul 2024