Small Business Energy Incentive

In the 2023/24 Federal Budget, the Government introduced a new energy program aimed at reducing small business power bills and emissions. This initiative includes the proposed ‘Small Business Energy Incentive,’ designed to promote renewable energy sources over fossil fuels like natural gas, oil, and coal. The incentive would provide small and medium-sized businesses (with less than $50 million in annual turnover) a 20% bonus deduction on eligible costs for electricity or renewable energy assets and improvements.

Under this provision, eligible taxpayers can deduct, for the 2024 income year, the lesser of:

(a)    20% of their total eligible expenditure on qualifying depreciating assets and asset improvements; or

(b)   $20,000.

These provisions could apply to almost any new electrical purchase you make, see below for examples.

The asset qualifies if it uses electricity and meets one of these conditions:

1. A new, reasonably comparable asset that uses fossil fuels (like gas, oil, or coal) was available in the market when the taxpayer first used or installed the asset. The fossil fuel use must be significant, not merely incidental. For example, replacing a gas heater with an electric air conditioner qualifies because both options were available in the market.

2. The asset replaces another asset and is more energy efficient. For instance, replacing an old coffee machine with a more energy-efficient model qualifies if it uses less electricity, based on manufacturer data.

3. If the asset isn't replacing another one, it qualifies if it's more energy efficient than a new, reasonably comparable asset available in the market. For example, installing a refrigerator in an office qualifies if it's more energy efficient than similar models available, using Energy Rating Labels or manufacturer-provided electricity consumption details for comparison.

Documentation such as marketing materials is recommended to prove the availability of reasonably comparable assets in the market at the start time.

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Examples of potential eligible assets: