The purpose of the small business energy incentive is to help businesses improve energy efficiency and save on energy bills.
A bonus 20% tax deduction will be afforded to businesses with a turnover of less than $50million for the cost of eligible assets and improvements which increase energy efficiency. The bonus applies to eligible expenditures between 1 July 2023 and 30 June 2024.
A maximum of $100,000 in total expenditure is eligible as part of the incentive, meaning the maximum bonus tax deduction will be $20,000.
Eligibility requirements
To access the small business energy incentive:
- Your business will need to have an aggregated annual turnover of less than $50million.
- The expenditure must be an allowable deduction for your business under the provisions in existing taxation law.
- For expenditure on eligible assets during the bonus period the asset must be both:
o first used or installed ready for use for any purpose, and
o used or installed ready for use for a taxable purpose.
- This means that if you first use or install and asset for any purpose prior to 1 July 2023, the bonus deduction will no longer be available. Even if the asset begins being used for a taxable purpose during the bonus period, the bonus deduction will not be permitted.
- Improvements to existing assets must be incurred during the bonus period.
Possible claims and requirements
- Depreciating assets:
o electrifying equipment (for example, installing a reverse cycle air conditioner in place of a gas heater)
o upgrading to more energy efficient appliances and equipment (for example, energy efficient refrigeration systems)
o installing time-shifting devices which allow electrical appliances to operate at off-peak times
o replacing a diesel engine with an electric motor.
- Improvements:
o enables the asset to only use electricity, or energy that is generated from a renewable source, instead of a fossil fuel
o enables the asset to be more energy efficient, provided that asset only uses electricity, or energy generated from a renewable source
o facilitates the storage, time-shifting or usage monitoring of electricity, or energy generated from a renewable source (for example, a battery that stores electricity).
Further details from the ATO are available here.
For more information or assistance please contact Infinite Accounting Solutions on 02 9899 4730 or via the contact page at www.ias-ca.com.au.