What is the small business energy incentive?
To help small businesses cut energy costs and improve efficiency, the Australian Government is offering a 20% bonus tax deduction on eligible expenses made between 1 July 2023 and 30 June 2024. Businesses with an aggregated annual turnover of less than $50 million can access this bonus, with a maximum claim of $20,000.
The deduction applies to eligible depreciating assets or improvements that enhance energy efficiency in your business.
Who is eligible to claim?
To be eligible, your business must:
- Have an aggregated turnover of less than $50 million.
- Purchase or improve energy-efficient assets between 1 July 2023 and 30 June 2024.
- Use the asset for taxable purposes during this bonus period.
- Claim regular deductions on these assets under tax law.
Note: Assets used before 1 July 2023, even if for non-business purposes, won’t qualify.
What kinds of expenses qualify?
Depreciating assets that use electricity may be eligible if they:
- Replace older, less efficient fossil fuel equipment.
- Offer improved energy efficiency compared to a similar asset.
- Are used for time-shifting, energy storage, or monitoring.
Eligible improvements to existing assets can include:
- Switching equipment from gas to electric.
- Installing energy-saving attachments (e.g. variable speed drives).
- Adding battery storage or energy monitoring systems.
Important: Vehicles, capital works, and solar panels (energy-generating assets) are excluded.
Example from the ATO
If your business replaces a gas heater with a new electric reverse cycle air conditioner costing $5,000, you could claim an extra $1,000 bonus deduction, on top of normal depreciation.
How do you claim the energy incentive?
The bonus deduction is claimed in your 2023–24 tax return (or 2024–25 for early balancers) and is calculated as 20% of eligible costs, capped at $100,000 expenditure.
GST-registered businesses must deduct the GST credit before calculating the 20% bonus.
What records should you keep?
You’ll need to document:
- Purchase and installation dates.
- Manufacturer comparisons to show energy efficiency.
- The asset’s purpose and usage in your business.
The ATO accepts manufacturer energy ratings, and you can refer to tools like Energy Rating Calculator.
Talk to Cotchy for help with your small business energy incentive
If you’re considering upgrading equipment or making energy-saving improvements, this tax break could offer major benefits — but timing is everything.
Contact Cotchy for guidance on the small business energy incentive
If you’re planning to improve your energy efficiency, contact our team to find out how the small business energy incentive applies to your business. Our accountants can help you claim the small business energy incentive correctly and maximise your tax benefits, contact us here: Chat with Cotchy.