The 20K Small Business Energy Incentive isn't just another policy - it's a game changer.
Whatās the buzz about?
Picture this: youāre a small business owner with an aggregated turnover under $50 million. Youāre eyeing a future where energy efficiency reigns supreme, and fossil fuels take a backseat. Thatās precisely where the Small Business Energy Incentive steps in. Pending parliamentary approval, this initiative offers a tantalising additional 20% tax deduction on qualifying energy efficiency improvements, capped at $20,000 bonus tax deduction per business entity. Itās not just a tax break; itās a catalyst for sustainable growth.
Counting the Dollars
Letās talk numbers. With up to $100,000 of total expenditure eligible for the incentive, the potential for savings are substantial. However, itās crucial to note that this isnāt a cash handout. Instead, it operates by either trimming your taxable income or beefing up your tax loss for the 2024 income year. Itās a win-win scenario for savvy entrepreneurs looking to optimise their financial strategy.
What Qualifies for the Incentive?
Navigating the eligibility maze is essential. Fortunately, itās not as daunting as it seems. The incentive covers both new assets and upgrades to existing ones. Forget about a rigid list of qualifying assets; instead, focus on meeting specific criteria.
For new depreciating assets, the rules are:
- The asset must utilise electricity.
- It should either outshine its fossil fuel counterparts in efficiency, replace less efficient assets, or demonstrate superior energy efficiency compared to available alternatives.
- Alternatively, it could be an energy storage, time-shifting, or monitoring asset, or an enhancement to existing energy efficiency.
As for upgrades to existing assets, the expenditure must:
- Transition the asset to solely using electricity or renewable energy.
- Enhance the assetās energy efficiency, provided it operates solely on electricity or renewable energy.
- Facilitate electricity storage, time-shifting, or usage monitoring from renewable sources.
To qualify, eligible assets or upgrades will need to be first used or installed ready for use, or the cost incurred for upgrading existing assets, between 1 July 2023 and 30 June 2024
Whatās Off the Table?
While the incentives are enticing, itās essential to understand what doesnāt make the cut. Assets or improvements reliant on fossil fuels are a definite no-go. The exclusion list also includes assets primarily geared towards electricity generation, capital works, and financing costs. Say goodbye to hybrids, solar panels, and motor vehicles.
Seize the Opportunity
As the business landscape evolves, embracing energy efficiency isnāt just a choice; itās a strategic imperative. With the Small Business Energy Incentive paving the way for substantial tax deductions, nowās the time to seize the opportunity.
How can Walsh Accountants help?
The $20k Small Business Energy Incentive isnāt just another policy—itās a game-changer. By aligning tax incentives with energy efficiency goals, it empowers SMEs to thrive in a sustainable future. Whether youāre planning to upgrade equipment or revamping operations, once this bill gets legislated, thereās never been a better time to embrace innovation and propel your business forward.
When it becomes available, proactive engagement with this initiative will empower businesses to adapt to future regulatory changes, consumer preferences, and technological advancements, ensuring long-term viability and resilience. Forward-thinking companies that capitalise on this initiative can gain a strategic advantage, driving growth, innovation, and sustainability.
If you would like to explore how you can benefit from this initiative, we’re here to help! Simply contact our office to speak with one of our business specialists.
