The Australian government has been under pressure to deliver on its renewable energy and carbon reduction targets before 2030. One new measure introduced in this year’s May Federal Budget is the Small Business Energy Incentive.

This initiative reflects the government’s commitment to fostering sustainable practices among small businesses, promoting energy efficiency, and driving the transition to a low-carbon economy.

The Small Business Energy Incentive is designed to drive electrification into small to medium-sized enterprises [SMEs] to significantly reduce their energy consumption.

The premise is simple, but the potential impact is profound – by providing financial incentives and support, the government is encouraging businesses to transition towards more energy-efficient operations.


understanding the Small Business Incentive Scheme

This initiative is structured around additional tax deductions for purchases associated with improving energy efficiency within a business.

The incentive covers a variety of avenues for energy reduction, including but not limited to, the upgrade of outdated and inefficient equipment, modern heating and cooling assets, and the installation of demand management systems (i.e. batteries or thermal energy storage assets).

Specifically, the incentive provides an additional tax deduction equal to 20% of eligible expenditure of up to $100,000.


who are the small businesses that qualify for the incentive?

For the purposes of this incentive scheme, SMEs with an aggregated turnover of less than $50 million will qualify to claim the additional tax deductions.


now the technical bits

As mentioned earlier, the incentive scheme was announced as part of the May Budget, therefore, and this is important…. We have not got the legislation and it has not become law yet!

At this stage without the draft legislation, our information is limited to media releases from the government and the Budget Papers themselves, so it’s critical to understand that while the government announcements may appear broad enough to encompass many potential avenues to utilise the incentive scheme, there will be some criteria that applies.


what’s in and what’s out

Based on the information we do have, the incentive scheme applies to the purchase of depreciating assets that are ready and installed for use between 1 July 2023 and 30 June 2024.

Therefore, the scheme may apply to purchases in this financial year that are not delivered or ‘plugged in’ until after 30 June 2023.

Further, we also know that certain types of assets will not qualify for the incentive scheme. These include:

  • Electrical vehicles
  • Renewable electrical generation assets
  • Capital Works and
  • Assets that are not connected to the energy grid and use fossil fuels.


thinking about taking advantage of the incentive scheme?

If you’re interested in taking action to reduce your business’s energy costs, there are a few things you’ll need to consider.

First, you’ll need to consider the types of assets that will inject value into your business, and the timeframes involved in getting the assets ready for use before 30 June 2024.

Next, you’ll need to think about the cost of purchasing the assets. In the current business environment, many businesses are focused on managing their cash flow so while an upfront purchase may be out of reach, you may want to also consider potential funding arrangements through asset brokers or your business bankers.

The final piece of the puzzle is to consider how the incentive scheme will mesh into the changes to the instant asset write-off for SMEs given the temporary full expensing measures will end on 30 June 2023.


final thoughts

Business owners will need to consider the potential long-term benefits to their businesses of reducing their energy consumption. Moreover, adopting sustainable practices often increases business appeal to environmentally conscious consumers, offering potential market advantages.

The Small Business Energy Incentive is a clear demonstration of the Australian government’s commitment to supporting small businesses while simultaneously encouraging sustainable business practices.

This initiative underscores the fact that economic growth and environmental sustainability are not mutually exclusive but can be complementary and synergistic.


we’re here to help

If you need assistance understanding whether your business is eligible for the Small Business Energy Incentive, contact our accounting team at or give us a buzz on 1300BDEPOT.


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