Small and medium businesses can maximise a 20% tax deduction on energy-efficient upgrades and electrification.

A new, limited incentive nudges businesses towards adopting energy efficient upgrades. The small business energy incentive provides a 20% taxe deduction designed to change the investment behaviour of small and medium businesses.

Legislation before Parliament will see SMEs with an aggregated turnover of less than $50 million able to claim a bonus 20% tax deduction on up to $100,000 of their costs to improve energy efficiency in their business. Only available for a limited time (and assuming the legislation passes Parliament) you’ll have until 30 June 2024 to invest in new and in the upgrade of existing assets.

How does it work?

Your business can invest up to $100,000 in total, with a maximum bonus tax deduction of $20,000 per business entity. The energy incentive is not provided as a cash refund, but will reduce your taxable income or increases the tax loss for the 2024 income year.

How to qualify?

The energy incentive applies to both new assets and expenditure on upgrading existing assets. There is no specific list of assets that can qualify, instead, the rules provide a series of eligibility criteria that need to be satisfied.

First, the expenditure incurred in relation to the asset must qualify for a deduction under another provision of the tax law.

If your business is acquiring a new depreciating asset, it must be first used or installed for any purpose, and a taxable purpose, between 1 July 2023 and 30 June 2024. If you are improving an existing asset, the expenditure must be incurred between 1 July 2023 and 30 June 2024.