The Australian Taxation Office (ATO) has released two updates for small businesses regarding the small business energy incentive and the temporary increase in the instant asset write-off threshold for the fiscal year 2023-24.
Both initiatives were sanctioned under the Treasury Laws Amendment (Support for Small Business and Charities and Other Measures) Act 2024, which received Royal Assent on 28 June 2024.
Small business energy incentive
Businesses (with an aggregated annual turnover of less than AUD 50 million) will have access to a bonus 20% tax deduction with the small business energy incentive. This applies to new assets, or improvements to existing assets, that support more efficient energy use.
Eligible assets must be used or installed, ready for use for any purpose, and used or installed, ready for use for a taxable purpose, between 1 July 2023 and 30 June 2024.
Eligible improvement costs must also be incurred during this period to be eligible for the bonus deduction.
Up to AUD 100,000 of total expenditure is eligible under the incentive. The maximum bonus deduction is AUD 20,000 per business.
What you can’t include or claim
While this incentive covers a broad range of expenditures, it’s important to know what you can’t claim:
- Assets and expenditure on assets that can use a fossil fuel;
- Assets and expenditure on assets that have the sole or predominant purpose of generating electricity (such as solar panels);
- capital works;
- Motor vehicles and expenditure on motor vehicles;
- Expenditure allocated to software development pools;
- Financing costs.
What you need to do when claiming the incentive is to make sure you:
- Have accurate records that provide evidence of the expenditure you claim;
- Can show and explain how you compared different assets when upgrading or making improvements;
- Keep up to date with information on ATO’s website on what, when, and how to claim;
- Seek advice from your registered tax professional if you have one.
Small Business Support – AUD 20,000 instant asset write-off
On 9 May 2023, as part of the 2023–24 Budget, the Australian Government announced it will improve cash flow and reduce compliance costs for small businesses by temporarily increasing the instant asset write-off threshold to AUD 20,000 from 1 July 2023 until 30 June 2024.
This measure is now law.
Small businesses, with aggregated turnover of less than AUD 10 million, can immediately deduct the full cost of eligible assets costing less than AUD 20,000 that are first used or installed ready for use between 1 July 2023 and 30 June 2024.
Small businesses that have claimed immediate deduction for an asset under the simplified depreciation rules in a prior income year can also immediately deduct an amount included in the second element (cost addition) of that asset’s cost, where the amount is:
- The first amount of second element cost incurred after the end of the income year in which the asset was written off;
- Less than AUD 20,000
- Incurred between 1 July 2023 and 30 June 2024.
The AUD 20,000 threshold applies on a per asset basis, so small businesses can instantly write off multiple assets.
Assets valued at AUD 20,000 or more can continue to be placed into the small business simplified depreciation pool and depreciated at 15% in the first income year and 30% each income year after that.
In addition, pool balances under AUD 20,000 at the end of 2023–24 income year can be written off.
Small business instant asset write-off extension
On 14 May 2024, as part of the 2024–25 Budget, the government announced it will continue to improve cash flow and reduce compliance costs for small businesses by extending the AUD 20,000 instant asset write-off by a further 12 months until 30 June 2025.
This measure is not yet law.
The Treasury Laws Amendment (Responsible Buy Now Pay Later and Other Measures) Bill 2024 containing the extension for the 2024–25 income year is currently before the Parliament.
