Small business figureheads fear the full $314 million in tax benefits expected under the Small Business Energy Incentive will go unrealised, with its delayed passage into law causing uncertainty among the business owners it was designed to help.
The Small Business Energy Incentive, introduced in the May 2023-2024 budget, promises an extra 20% bonus tax deduction for small businesses undertaking energy-efficient upgrades.
To claim the bonus deduction, those upgrades must be installed or ready for use in the business by June 30, 2024.
However, legislation underpinning that tax deduction was only introduced to Parliament in September last year.
Disputes over the instant asset write-off, another contentious measure contained within the Bill, have seen it bounce between the Senate and House of Representatives without resolution.
Over the weekend, the federal opposition said it will drop plans to expand the instant asset write-off in order for the measures to pass by the end of the financial year.
The Bill is now set for consideration by the Senate on Tuesday night.
Even if it passes, businesses will have less than a week to purchase and install energy-saving upgrades with full legislative backing.
If the highly unlikely event the Bill does not pass by July 1, small businesses could miss out on the Small Business Energy Incentive and $20,000 instant asset write-off entirely.
Speaking to SmartCompany on Tuesday, Australian Small Business and Family Enterprise Ombudsman (ASBFEO) Bruce Billson said local traders have been left in the lurch due to the delayed passing of the Small Business Energy Incentive.
The policy was designed to encourage SMEs to spend, but a lack of certainty over the program may have deterred them, he said.
“The small business community is exasperated about the way these measures have progressed,” he said.
Billson feared the bonus tax deductions could primarily benefit businesses that planned to purchase energy efficiency upgrades before the policy was even announced.
“I’d hate to see economists questioning the value of these settings because they’re only rewarding behavior that otherwise would have happened anyway.”
Gavan Ord, business investment and international lead at CPA Australia, echoed those concerns.
“It seems likely that the only businesses who will ultimately benefit from the measure will be those who coincidentally happened to make upgrades this year, rather than those who were incentivised to do so because of the scheme,” Ord said.
“This is emblematic of the problem.”
To stop similar delays in the future, Billson says future small business tax breaks should only come into effect after they receive royal assent, encouraging parliamentarians to pass the legislation as soon as possible.
Doing so would give small businesses more time to assess how they could take advantage of the measures, creating a “reasonable opportunity for the measure to have the intended effect,” he continued.
CPA Australia, who in July 2023 warned the Small Business Energy Incentive eligibility period was too short, wants similar policies to have a greater lifespan in the future.
“We’re calling on this and future governments to ensure that future business support measures should be for a minimum of two years to give businesses a shot at benefiting,” Ord said.
For now, lawmakers have agreed to disagree on the most contentious element of the bill, the size and scope of the instant asset write-off.
Even so, the federal opposition — which championed amendments expanding the policy in the Senate — has laid blame for the delays at the feet of the government.
Labor’s “delay on passing this Bill leaves struggling businesses in manufacturing, hospitality, and tourism without support to invest in bringing down their power bills,” Shadow Treasurer Angus Taylor said in a statement.
Small Business Minister Julie Collins previously accused the opposition of driving delays through inconsistent support for the $20,000 write-off plan.
“On one hand, they’re saying ‘You’re spending too much,’ and on the other, saying ‘You’re not spending enough,’” Minister Collins told SmartCompany earlier this month.
Another potential solution to future delays would be the establishment of a permanent instant asset write-off threshold, making it harder for debates over its size to postpone other small business-focused legislation.
That proposal is backed by Billson, who in his former tenure as Minister for Small Business oversaw several iterations of the write-off.
“I’d like to see measures like the ones that have been announced in recent budgets made permanent and when the budget and economic times warrant, governments might choose to enhance them even further based on those circumstances,” he said.
But the idea of a permanent instant asset write-off — above the $1,000 baseline that exists without extra legislation — is another political minefield.
The federal opposition has thrown its weight behind making it permanent.
But for now, the government says year-by-year adjustments are appropriate and can respond to the economic needs of the time.
“Making sure that the budget is fit for purpose for the time, that’s what that’s about,” Minister Collins said.
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Senior Business Journalist
Focused on the small business sector, David’s work covers the political, regulatory, and economic issues facing Australian entrepreneurs. Prior to joining SmartCompany, he was a reporter for Business Insider Australia. You can follow him on LinkedIn.
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