Australia’s small and medium-sized businesses (SMEs) will get a tax break of up to $20,000 for making investments like installing solar panels, batteries and heat pumps, and electrifying their heating and cooling systems under a new policy announced ahead of the release of the Federal Budget later this month.
Treasurer Jim Chalmers announced the Small Business Energy Incentive at the weekend, saying up to 3.8 million SMEs would benefit from the tax cuts for small businesses that invest in electrification and energy efficiency.
Under the budget policy, businesses with turnover of up to $50 million would be entitled to a bonus 20% tax deduction on solar panels, batteries and other electrical devices when they invest up to $100,000 to swap out fossil fuel energy and technology.
The maximum bonus tax deduction is $20,000 per business, with the initiative expected to cost $314 million over the forward estimates for the next four years.
Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.
Rewiring Australia co-founder and chief scientist Dr Saul Griffith welcomed the initiative, saying the scheme would help accelerate electrification among Australia’s SMEs and lock in years of benefit for those who seized the opportunity.
Griffith said swapping out fossil-fuelled devices and energy sources for renewable-backed electrification is the fastest, most cost-effective way to decarbonise our domestic economy but will also “permanently lower the cost of business.”
“It embeds thousands of dollars’ worth of annual savings into the annual operations of small businesses, savings that accrue over the long term,” he said.
“Once a business has switched to solar-backed electrification, they never look back.”
Griffith said switching to rooftop solar and electric devices also gives businesses certainty.
“They know their operating costs won’t suddenly surge due to something beyond their control,” he said.
The Federal Budget is due to be delivered on 9 May, 2023.
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