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Green SMEs eligible for $20k tax break

To support businesses in reducing energy consumption costs, the government recently announced a new tax incentive, the Small Business Energy Incentive, which will be featured in next month’s budget.

Treasurer Jim Chalmers has announced the Small Business Energy Incentive program, which offers a tax deduction of up to $20,000 for small and medium-sized businesses investing in energy-efficient equipment. 

This initiative is aimed at supporting small and medium-sized businesses across Australia with a turnover of less than $50 million to reduce their energy consumption costs by investing in energy-efficient equipment.

The program provides a tax deduction of up to $20,000 for eligible businesses that invest in assets and upgrades such as the electrification of cooling and heating systems, more efficient fridges, induction cooktops, heat pumps, and batteries. This incentive is expected to help up to 3.8 million small businesses in Australia lower their energy costs and save on their energy bills.

Under the program, eligible businesses will receive an additional 20 per cent deduction on spending that supports electrification and more efficient energy use. Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business. However, assets or upgrades must be first used or installed ready for use between 1 July 2023 and 30 June 2024 to be eligible for the incentive.

According to Treasurer Jim Chalmers, small businesses are the backbone of communities across Australia, and this incentive will help them share in the benefits and opportunities of the energy transition that is now underway. This program aims to support investments that deliver ongoing business power bill savings while helping Australia lower emissions.

The initiative, which is expected to cost $314 million over the forward estimates, has been specially timed to help small businesses lay the foundations for their future growth and position them to bounce back after a challenging period for the economy. Backing small businesses is part of the government’s plan to build a stronger, sustainable, and more resilient economy that delivers more opportunities for Australians.

Dr Chalmers said small businesses will be front and centre in the budget.

“This incentive is all about helping small business save energy and save on their energy bills, support that comes on top of the direct energy bill relief for small businesses that will be a centrepiece of the budget,” he said.

The Australian Retailers Association (ARA), the country’s largest peak body for retail, has expressed its support for the Federal Government’s announcement of a bonus tax deduction aimed at reducing the costs of doing business, energy usage, and greenhouse gas emissions for small and medium-sized retailers. 

ARA CEO, Paul Zahra, said the initiative will help small businesses reduce costs and emissions by improving energy efficiency and is in line with the ARA’s plan to achieve net-zero emissions by 2050.

“We’re pleased to see the Government respond to the needs of small business in this challenging year, and hope this is one in a range of measures to support this vital part of our economy,” said Zahra. He added that many small retailers that suffered severe cashflow impacts through the pandemic are now navigating a host of fresh financial challenges. “Cost-of-living pressures continue to impact consumer spending, and there are higher costs of doing business as well as debt repayments falling due for some small retailers,” he said.

Zahra believes that the program will be a much-needed incentive for small businesses to make the investment in energy efficiency and electrification, which will reduce their costs of doing business immediately. He said, “This is also a positive and practical step towards more sustainable operations, which is high on the agenda for retail.”

According to Zahra, the health of the Australian retail sector impacts all Australians. The sector directly employs one in ten Australians and is dominated by small to medium size businesses, many of which are family-owned and operated. “Retail services and offerings also help to improve the lifestyle, wellbeing, and vitality of Australian communities,” he said.

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Yajush Gupta

Yajush Gupta

Yajush is a journalist at Dynamic Business. He previously worked with Reuters as a business correspondent and holds a postgrad degree in print journalism.

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