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Businesses with an aggregated turnover of less than $50M will be entitled to a 20% deduction for expenditure that supports electrification and more efficient use of energy.
This bonus deduction will be available for expenditure incurred from 1 July 2023 until 30 June 2024.
The temporary measure will apply to eligible assets or upgrades first used or installed ready for use between 1 July 2023 and 30 June 2024.
Businesses that are planning to invest in electrification and more efficient use of energy should consider conducting installations and upgrades to eligible assets in the 2023–24 income year to be able to avail the $20,000 bonus tax deduction.
This measure is currently in the exposure draft stage and will require parliamentary approval to become law.
The eligible expenditure includes a range of depreciating assets, as well as upgrades to existing assets which include upgrades to more efficient electrical goods. A depreciating asset is eligible for the bonus deduction if it uses electricity and there is a new reasonably comparable asset that uses a fossil fuel, it is more energy efficient than the asset it is replacing or is an energy storage, demand management or efficiency-improving asset.
Any expenditure incurred in excess of the $100,000 cap may still be eligible for other tax deductions under small business simplified depreciation rules.
The following depreciating assets may qualify for a bonus deduction:
The following improvements may qualify for a bonus deduction:
There are specific exclusions to be aware of when considering tax incentives. These exclusions encompass assets that can utilise fossil fuels, expenditures on such assets, and assets primarily used for electricity generation, such as solar panels. Capital works, motor vehicles (including hybrid and electric) and their associated expenditures are also excluded.
Additionally, assets allocated to a software development pool, financing costs like interest and borrowing expenses, fall under the exclusions. However, it's worth noting that electric and hybrid vehicles may still qualify for other tax incentives, such as the FBT exemption, subject to certain conditions.
For depreciating assets first used or installed during the 2023–24 income year, businesses must claim the bonus deduction in the 2023–24 income year. For improvements made to existing assets, entities must claim the bonus deduction in the income year in which the improvement cost is incurred.
Early and late balancers may claim the bonus deduction across more than one income year, provided the eligible asset was first used or installed, or the improvement cost was incurred, during the bonus period.