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How To Take Advantage of Energy Incentives for Small Businesses in Australia
Key Takeaways:
Importance of Energy Efificiency in Small Businesses: Energy efficiency is crucial for small businesses, offering cost savings, sustainability, and competitive advantages.
Government Incentives: The Australian Federal Government provides several incentives to help small businesses improve energy efficiency, including the small business energy incentive and the instant asset write-off.
Small Business Energy Incentives: Small businesses can benefit from a bonus 20% tax deduction on eligible energy-efficient assets and improvements purchased during the bonus period.
Instant Asset Write-Off: Small businesses can claim immediate deductions on assets under $20,000, facilitating cash flow and encouraging energy-efficient upgrades.
Why Energy Efficiency Matters for Small Businesses
For small businesses, focusing on energy efficiency isn’t just about cutting operational costs—it’s a pathway to long-term resilience and growth. Making smarter decisions around energy use can improve your bottom line and reduce your environmental footprint, an advantage that resonates well with today’s eco-conscious customers. With energy-efficient equipment and upgraded infrastructure, small businesses can build a competitive edge and attract more loyal customers who value sustainability.
Energy efficiency can feel daunting, especially if it seems like a costly, complex upgrade. However, many options are surprisingly affordable and straightforward, with incentives available to further ease the transition. For instance, upgrading to LED lighting, investing in energy-efficient appliances, and leveraging smart technologies like energy management systems are often straightforward changes that can result in meaningful savings. Additionally, energy-efficient improvements often increase workplace comfort, helping boost employee productivity and satisfaction.
As the demand for eco-friendly businesses grows, showing your commitment to sustainability through energy efficiency can make your business stand out. Ultimately, being an environmentally responsible business can enhance your reputation and allow you to thrive in an increasingly competitive marketplace.
Federal Energy Incentives for Small Businesses in Australia
The Australian Federal Government offers several incentives to support small businesses in reducing energy use and lowering costs, particularly in light of the challenges many businesses have faced post-COVID-19. As the economy recovers, the government recognises the need to support small businesses in becoming more resilient—and more energy-efficient.
These incentives operate separately from other standard deductions, allowing small businesses to benefit even more from their energy-saving initiatives. Eligible assets might include energy-efficient appliances, smart management systems, and renewable energy equipment upgrades that help businesses use energy more effectively.
If your business qualifies for the instant asset write-off and the energy incentive, you can claim both within the 2023-2024 income year. This combined benefit provides a unique opportunity to maximise your deductions and support your business’s energy efficiency goals.
Small Business Energy Incentives
The small business energy incentive provides a bonus 20% tax deduction on the cost of eligible energy-efficient assets and improvements. The incentive applies to assets and upgrades purchased and installed during the “bonus period,” which runs from 1 July 2023 to 30 June 2024.
Instant Asset Write-Off
The Instant Asset Write-Off is a tax incentive that allows small businesses to immediately deduct the full cost of certain assets, rather than depreciating them over multiple years. Recently, the Australian Government raised this threshold from $1,000 to $20,000 for the 2023-24 and 2024-25 income years, meaning businesses can now write off assets costing under $20,000 in one go, offering immediate tax relief and improved cash flow.
Small Business Energy Incentives
There is a cap on the small business energy incentive, limiting the bonus deduction to $20,000 per business. The total amount eligible for the bonus deduction is also capped at $100,000, meaning that while you can claim multiple deductions, the maximum benefit you can receive is set at $20,000. This cap applies across all businesses, ensuring equal access to the incentive’s benefits.
Eligibility Criteria
To qualify for the small business energy incentive, your business must:
1. Meet the turnover threshold: Your annual turnover should be less than $50 million.
2. Use eligible assets: Eligible assets must be installed and operational for business purposes during the bonus period.
3. Improvements: Any upgrades to existing assets should be completed within the bonus period and should serve a clear energy efficiency purpose.
It’s worth noting that assets initially used before the bonus period do not qualify, even if they are repurposed for energy efficiency after the period begins. Additionally, if you’re eligible for other deductions (e.g., skills training or small business skills and training boost), you may still qualify for further bonus deductions under the energy incentive.
What to Claim
The small business energy incentive applies to depreciating assets and improvements made to assets that support energy efficiency. Eligible costs may include:
Depreciating Assets
These are assets installed and used between 1 July 2023 and 30 June 2024.
Upgrading to energy-efficient refrigeration or air conditioning systems
Installing time-shifting technology, which optimises energy use during off-peak times
Replacing diesel engines with electric alternatives
Investing in energy-efficient lighting solutions, such as LED systems
Improvements
Enhancements to existing assets can also be eligible if they directly increase energy efficiency.
Adding an energy storage device, such as a Virtual Power Plant-enabled battery, for better energy management
Enhancing insulation or upgrading heating systems to reduce energy waste
Improving an asset’s efficiency by switching it to renewable energy sources, like electric over gas
If your business also claims GST, the bonus deduction is calculated based on the amount spent minus the GST amount claimable as an input tax credit.
How to Leverage the Small Business Energy Incentive
To make the most of the small business energy incentive, consider the following steps:
1. Identify Eligible Assets and Improvements: Assess your business’s current energy needs and identify areas where upgrades could offer savings, such as switching to energy-efficient machinery or installing smart energy systems.
2. Plan for Installation: Since assets must be in use within the bonus period, planning is essential. Ensure timely installation and usage for optimal savings.
3. Calculate Potential Savings: Use online energy rating tools to determine which appliances or systems offer the best energy efficiency. Websites like Energy.gov.au can help you find energy ratings and compare different assets to maximise savings.
4. Keep Detailed Records: Accurate record-keeping is critical to ensure compliance and substantiate your deductions. Maintain receipts, invoices, and comparison documentation showing how you determined the energy efficiency of selected assets.
How to Claim the Small Business Energy Incentive
Claiming the small business energy incentive is a straightforward process. When preparing your business tax return, you’ll find a section dedicated to this incentive. Make sure to document all eligible expenses and consult with your accountant or visit the Australian Tax Office (ATO) website for guidance on accurately completing the claim.
Instant Asset Write-Off
For small businesses in Australia, staying competitive means investing in assets that streamline operations and fuel growth. But managing cash flow while making essential upgrades can be challenging. That’s why the recent announcement of the $20,000 instant asset write-off comes as a game-changer, allowing small businesses to make key investments with immediate tax deductions.
Qualification Requirements
To qualify for the $20,000 instant asset write-off, your business must have a total annual income of less than $10 million. If this applies to your business, you can claim the full cost of assets under $20,000 that are first used or installed between July 1, 2023, and June 30, 2024.
As part of the 2024–25 Budget, the government extended this write-off by an extra year, so you can now take advantage of it until June 30, 2025. This extension aims to make it easier for small businesses to manage cash flow and reduce paperwork.
How It Works
The new threshold means small businesses can:
Claim Immediate Deductions on Multiple Assets: Each eligible asset costing under $20,000 qualifies individually, allowing you to write off several assets in the same financial year instantly.
Deduct Second Element Costs: For assets previously claimed under the simplified depreciation rules, small businesses can now deduct additional costs (referred to as “second element costs”) if they are under $20,000 and incurred within the 2023-24 financial year.
Assets valued at $20,000 or more can still be placed in the small business simplified depreciation pool. These assets will depreciate 15% in the first year and 30% each year after. You may write off the entire balance if the pool’s balance is under $20,000 by the end of the 2023-24 income year.
How Small Businesses Can Use The Instant Asset Write-Off
The increased threshold offers small businesses a unique opportunity to:
Upgrade to Energy-Efficient Equipment: Now’s the time to make sustainable upgrades, from energy-efficient appliances to solar-powered equipment, reducing your long-term operating costs and environmental footprint. With assets under $20,000, you can take advantage of the instant write-off and see both financial and environmental returns.
Expand Capacity Sustainably: Purchase additional assets, such as energy-efficient delivery vehicles or specialised machinery that utilise eco-friendly technologies. This allows your business to grow while minimising your carbon footprint and operating sustainably.
Boost Operational Efficiency with Green Solutions: Invest in digital tools, business software, and automated processes designed to streamline your operations while promoting sustainability. By choosing eco-friendly solutions, you can reduce resource consumption, waste, and manual work, helping your business stay competitive in an increasingly green economy.
Conclusion
By using the small business energy incentive and the instant asset write-off, small businesses can lower their energy costs, help the environment, and set themselves up for future growth. In today’s competitive market, being sustainable is not just a trend; it’s important for long-term success. Businesses that take action now—by adopting energy-saving measures and taking advantage of government incentives—will be better prepared to succeed in an eco-conscious world.
Let the small business energy incentives in Australia be your starting point for a greener, more resilient future. Explore your options, make smart upgrades, and enjoy the benefits of energy efficiency for years to come. Your commitment to sustainability will not only improve your bottom line but also show your business as a leader in caring for the environment.
At 1KOMMA5°, we understand that sustainability is crucial for your business's future. With our expertise in energy-efficient technologies, we can help you make the most of these government incentives. From solar panel installations to energy management systems, we offer tailored solutions that align with your business's goals and budget.
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FAQ
Frequently Asked Questions about Installing Solar Power
There are great government rebates/incentives still in place for eligible households. Basically, the larger the panel array, the more STCs your solar system generates as it is based on the expected output of the system over time.
When you buy a solar system, the purchase price is normally reduced by the value of the STCs created by your system. You simply fill out a form on the day of installation to confirm that the system has been installed, and that’s it. There is no additional paperwork that you need to do.
Small-scale Technology Certificates (STCs)
Small-scale Technology Certificates (STC’s) – previously known as Renewable Energy Certificates or RECS – are created when a Renewable Energy System such as a Solar PV system is installed.
The number of STC’s depends on the predicted amount of energy generated and hence the larger the system the greater the rebate. In essence, one STC is created for every megawatt-hour of production capacity of the system.
This is further multiplied by the number of years the system is likely to generate energy (for home solar systems, this is usually 15 years, although the life of the solar panels themselves is considerably more than that).
This incentive program is being phased out until 2030, so each year the number of certificates your system is eligible for reduces.
STC Price
The system for trading and pricing STCs for small systems is managed by the Small-scale Renewable Energy Scheme (SRES).
STCs are bought by Liable Parties (usually electricity retailers) and must be surrendered at the end of each quarter. As the number of STCs that are required to be surrendered is a fixed amount each year, but the number of STCs created is variable, the price paid for STCs also varies and is determined by supply and demand.
The Federal Government legislated in 2010 a fixed price for STCs by implementing a Clearing House system where STCs can be bought and sold for $40. However, there is no requirement for Liable Parties to purchase from the Clearing House, so they are likely to only do so if there is a shortage of STCs or the market price exceeds $40. There is currently a surplus of STCs in the market which means the market price of STC’s below $40
The Feed In Tariff is only something you need to worry about if you don’t have battery storage.
The price your chosen energy retailer pays for any excess electricity generated from your solar panels is recorded as a credit on your power bill.
In NSW, solar power is fed into your home as it is generated and your household will use it first before you draw power from the grid.
This means that for every kWh of solar power used in the home you are directly saving money you’d spend on your power bill. This reduction in your power bill is the main financial benefit of solar power.
Everything else will be bought up at an agreed rate by your electricity retailer.
At the moment, most feed-in tariffs are between 5 and 10 cents per kWh, with many being about 7 cents. They bounce up and down a lot, for example in previous years they have been up over 20 cents per kWh. Typically, they are always at least 5 cents per kWh.
Once you sign up for a 1KOMMA5° Installation, we immediately submit your grid application to the relevant energy distributor. For systems up to 5kWs, this is a formality. For larger systems it can take a few days or more. Once we receive approval, your installation will be managed by our installation coordinator, who will welcome you to 1KOMMA5° and book an installation date for you. This is generally booked within around two weeks and installation dates are available Monday to Friday, weather permitting.
We endeavour to have your system installed within 2-4 weeks unless you request us to hold for whatever reason. Due to our strict safety policy, we do not install solar systems when it rains. In the event of inclement weather, we will rebook your installation as soon as possible. We always work with your requests as we strongly recommend that someone be home on the day of installation.
Green Loans can be an affordable way to pay for your solar power system and is only available for approved products. As a Clean Energy Council Accredited installer, all our systems qualify.
Green Loans can be used to finance 1KOMMA5° systems from $1,000 to $30,000 over a 2-7 year term. Once you have received a referral from 1KOMMA5°, online approval usually occurs within 1-2 business days. Green Loans have a competitive fixed interest rate that is as low as 7.99% p.a.* | Comparison rate 9.21% p.a.^ Establishment fee of $299 added to the loan amount. $2.70 per week account keeping fee included in repayments.
To be eligible to apply you must:
Be over 18 years old and an Australian resident or citizen
Own or be purchasing a home
Be employed, self-employed, a self-funded retiree; or is receiving the Government Age Pension
Have an Australian driver’s license or Passport
Provide two most recent payslips or 90 days of bank statements
There are a number of good, competitive Green Loan providers – ask us about the options available.