October 9, 2023

$20k deduction for ‘electrifying’ your business: A win-win for you and the environment

Businesses are encouraged to join the movement in a world where energy efficiency and renewable energy sources are gaining increasing attention. The government has taken a significant step in this direction by introducing a bonus tax deduction for small and medium enterprises (SMEs) that invest in energy-efficient upgrades. This article will delve into the details of this incentive and how your business can leverage it.

A closer look at the $20k deduction

The new legislation grants SMEs with an aggregated turnover of less than $50 million to claim a bonus 20% tax deduction on up to $100,000 of their costs to enhance energy efficiency. However, a ticking clock is attached to this offer; businesses need to act quickly as the deadline to invest in new or upgrade existing assets is 30 June 2024.

Eligibility criteria for assets

The energy incentive applies to new assets and expenditure on upgrading existing assets. To qualify, new assets must run on electricity and prove to be more energy-efficient than similar assets that use fossil fuels. For existing assets, the expenditure must enable them to utilise electricity or energy from renewable sources or improve their energy efficiency.

What doesn't make the cut?

Understanding what doesn't qualify for the bonus deduction is equally essential. Certain assets and improvements, such as assets running on fossil fuels, solar panels, motor vehicles, capital works, and financing costs, are not eligible.

Examples of eligible assets

To help you comprehend what qualifies for the deduction, here are a few examples:

  • Electrifying heating and cooling systems.
  • Upgrading to more efficient fridges and induction cooktops.
  • Installing batteries and heat pumps.
  • Replacing a gas heater with an electric reverse cycle air conditioner.
  • Swapping a conventional coffee machine with a more energy-efficient model.

Final thoughts: A valuable incentive

The $20k deduction for 'electrifying' your business presents a golden opportunity for SMEs to invest in energy-efficient upgrades. By availing of this deduction, businesses can decrease their energy costs and contribute towards a greener future.

At Lead Advisory Group, we are dedicated to helping businesses thrive and make informed financial decisions. If you're considering making a significant investment to qualify for the bonus deduction, our team of experts can offer customised advice and guidance on maximising the benefits. Contact us today to discuss how we can facilitate your business's growth and success.

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