SMEs will get a tax break of up to $20,000 for installing solar panels, electrifying their cooling and heating, installing batteries and heat pumps, and investing in induction cooktops to replace gas under a new policy announced ahead of this month’s federal budget.
Treasurer Jim Chalmers announced the Small Business Energy Incentive on the weekend, saying up to 3.8 million small and medium-sized businesses would benefit from the tax incentive to make their energy usage more sustainable and efficient.
Under the budget policy, businesses with turnover up to $50 million will be entitled to a bonus 20% tax deduction on batteries and other electrical devices when they invest up to $100,000 to swap out fossil fuel energy and technology.
The maximum bonus tax deduction is $20,000 per business, earmarking some $314m against forward estimates for the next four years.
Energy Minister Chris Bowen said many small business owners wanted to electrify their operations but were struggling to cover the upfront cost, continuing the incentive would unlock “medium and long-term” savings on energy bills across the country.
Not only that, Small Business Minister Julie Collins added, the incentive would “support growth and improve the resilience of Australia’s small businesses” by reducing the business economy’s reliance on market-volatile fossil fuel prices.
Rewiring Australia co-founder and chief scientist Dr Saul Griffith agreed, saying small businesses that are reliant on fossil fuel energy “suffered serious bill shock” this year as fossil fuel commodities like gas spiked in price amid Russia’s invasion of Ukraine.
“But when you assist small businesses to swap out polluting energy sources and machines for renewable-powered electric versions you permanently lower the cost base of a business,” Griffith says.
“It embeds thousands of dollars worth of annual savings into the annual operations of small businesses, savings that accrue over the long term.”
Griffith says a “new era of abundance and stability for Australian small business” is abound, continuing that “there are tens of billions of dollars wasted every year in the Australian economy on expensive and inefficient fossil fuels”.
And it’s not just the bottom line that’s set to benefit. Smart Energy Council chief executive John Grimes suggested the tax break could have a flow-on effect for customers, effectively serving as a cost of living measure amid high inflation.
“Ensuring our small business can take part in the energy revolution means cheaper energy costs that can be passed on to customers.”
Last month, ACT independent Senator David Pocock warded off what he called a desperate attempt from the Australian Pipelines and Gas Association to delay the electrification of homes and businesses after it warned of a looming $63bn price tag.
He said the APGA had “erroneously and over simplistically extrapolated” a costing exercise by the Parliamentary Budget Office looking into a small pilot program to electrify 1000 homes to the tune of $13,000 each in the ACT.
“Vested fossil fuel interests should not be allowed to muddy the waters when it comes to the economic, human health and environmental benefits the clean energy transition is offering Australian households and businesses,” Pocock said.
APGA chief executive officer Steve Davies said the enormous price tag of fully electrifying Australian homes and businesses has been “frequently downplayed” adding it was up to fossil fuel industries to decarbonise and “do so in a way that’s economical for households and businesses during this cost-of-living crisis”.
It’s at odds with a report from the Australian Sustainable Built Environment Council that found that electrification was the “least costly option” for decarbonisation and that electrified buildings would save $49bn between 2024 and 2050.
Emma Elsworthy is Climate Editor at The Mandarin.
