As noted in our June Tax Alert and Budget Alert, there are numerous items in the 2023-24 Federal Budget that directly affect and/or benefit small businesses. Among the changes in this year’s budget, the Government has announced a redirection of $113.1 million over the next eight years across the Climate Change, Energy, the Environment and Water portfolio to fund portfolio policy priorities, and several of these include environmental incentives for SMEs.
Many of the new investments, tax incentives and initiatives are designed to reduce carbon emissions, increase funding for alternative energy, and help Australians use energy more efficiently as the country works to achieve net zero emissions by 2050.
Here are three areas where your small business may be able to take advantage of budget incentives while also doing your bit for the environment.
Details on the Small Business Energy Incentive are still being finalised, but in short, the scheme is designed to drive electrification by providing financial incentives and support, helping businesses transition towards more energy-efficient operations and significantly reduce energy consumption.
Small and medium businesses (with annual turnover of less than $50 million) that invest in energy-efficient systems – such as next-generation refrigeration, electric heating systems, batteries, or thermal energy storage – will be eligible for bonus tax deductions of 20%. The cap on any of these projects is $100,000, thereby providing up to $20,000 in deductions.
If your turnover is less than $10 million, you may be able to use the $20k ‘instant asset write-off’ to immediately deduct eligible assets.
In addition, the Budget also includes an Energy Bill Relief Fund with business assistance of up to $650 for the 2023-24 financial year. This reflects the recent rise in energy costs and is designed to help eligible small businesses cope with inflated prices. To be eligible, your business must be on a separately metered tariff, and your annual electricity consumption must be less than the threshold, which is 160MWh in South Australia. If you are eligible, you will receive bill relief on your electricity bills from 1 July 2023.
The Government is taking steps towards establishing a domestic renewable hydrogen industry, so if your business is part of this industry – or supplies materials or supports it in some way – you may be able to take advantage.
The $2 billion Hydrogen Headstart initiative will underwrite the biggest green hydrogen projects to be built in Australia, ensuring that large-scale projects already in development can get off the ground, and will provide revenue support for investment in renewable hydrogen production through competitive contracts. Funding will cover the commercial gap between the cost of hydrogen production from renewables and its current market price. If you want to learn more or think your business may be able to benefit from this initiative, visit the Department of Climate Change, Energy Environment and Water (DCCEEW) website.
Reduced Emissions and More EVs
Transport is Australia’s third-largest source of emissions – and unfortunately, Australians’ growing preference for larger vehicles has been eating away at the small gains achieved through electric vehicles (EVs).
In an effort to reduce emissions, the Government has set aside $20.9 million over five years from 2022–23 for various initiatives. Funding will also support research on retrofitting existing buildings with electric vehicle charging infrastructure, and the potential for a large format battery recycling, reuse and stewardship initiative in Australia – so if your business is connected to the EV market (or you’re interested in purchasing an electric vehicle for yourself or your company fleet), you may benefit from this part of the scheme.
Don’t forget that from 1 July 2022, employers don’t pay FBT on eligible electric cars and associated car expenses. Please just note though, that the 2023 budget confirmed that plug-in hybrid electric cars (PHEV) will be removed from the fringe benefit tax exemption for electric cars for any PHEVs delivered after 1 April 2025.
Wondering how your business can take advantage of some of these programs or incentives? Contact the experts at Accru Harris Orchard today.