The small business incentive – Can you benefit?

Could you supercharge your business while saving on taxes?

If you made energy-efficient upgrades between 1 July 2023 and 30 June 2024, you may be eligible for a valuable tax deduction under the Small Business Energy Incentive.

The incentive offers businesses a bonus 20% tax deduction for costs incurred on new assets or improvements that support more efficient energy use.

Let’s find out if your business qualifies and how you can take advantage of this opportunity.

What is the small business energy incentive?

The Small Business Energy Incentive offered businesses with an aggregated annual turnover of less than $50 million a bonus 20% tax deduction. This applies to the costs incurred for new assets or improvements to existing assets that promote more efficient energy use.

Who is eligible?

To potentially be able to claim this incentive, you must meet the following criteria:

1. Business turnover: The business must have an aggregated annual turnover of less than $50 million.
2. Eligible assets and improvements: The incentive applies to assets and improvements that support more efficient energy use.
3. Timing: Eligible assets must have been first used or installed ready for use, both for any purpose and a taxable purpose, between 1 July 2023 and 30 June 2024. Additionally, the eligible improvement costs must have been incurred within this period.
4. Expenditure limit: Up to $100,000 of total expenditure is eligible for the incentive. The maximum bonus deduction a business can claim is $20,000.

What you can’t claim

While the incentive covers a wide range of energy-efficient expenditures, there are specific exclusions to be aware of:

• Assets and expenditure on assets that can use a fossil fuel.
• Assets and expenditure on assets designed primarily to generate electricity, such as solar panels.
• Capital works.
• Motor vehicles and expenditure on motor vehicles.
• Expenditure allocated to software development pools.
• Financing costs.

Steps to claim the incentive

To ensure you can successfully claim the Small Business Energy Incentive, make sure to follow these steps:

1. Maintain accurate records: Keep detailed records that provide evidence of the expenditure being claimed. This includes invoices, receipts, and any other relevant documentation.
2. Compare assets: Demonstrate and explain how different assets were compared when deciding on upgrades or improvements. This comparison should show that the chosen assets support more efficient energy use.
3. Stay informed: Regularly check the ATO website for the latest information on the incentive. Guidelines and eligibility criteria can change, and staying informed ensures your clients are always compliant.

The Small Business Energy Incentive presents a valuable opportunity for eligible businesses to benefit from a bonus tax deduction. However, to fully benefit from this incentive, it’s important to make sure you have all the necessary documentation and understand the exclusions. 

If you are uncertain about eligibility for certain expenses or how to claim the incentive properly, seek advice from a registered tax professional (like us).