Labor faces calls from CPA Australia, ASBFEO to extend small business energy incentive

Labor is facing calls from accountants and the small business ombudsman to extend a small business energy incentive due to expire on June 30, despite being not having passed in the Senate.

The Albanese government is being urged to extend the small business energy incentive for a further two years. Picture: Nikki Short/NCA NewsWire

Australia’s professional accounting body has called on the federal government to extend the small business energy incentive for a further two years as it warns that no company stands to benefit from the scheme.

The one-year measure was announced in the 2023 federal budget as a tax incentive to support small and medium-sized businesses making energy-efficient upgrades, and is due to expire on June 30.

CPA Australia says that the scheme has yet to pass parliament, meaning that businesses who have already made investments stand to be significantly short-changed. It has also warned that even if it did pass later this month, businesses would have less than a week to purchase, install and use their new energy-efficient assets in order to qualify for the tax incentive.

CPA business investment and international lead Gavan Ord said businesses need to operate in an environment of certainty and big announcements about tax incentives followed by a year of uncertainty are “unhelpful and frustrating”.

“These temporary incentives that become law at the very last minute have become a running joke with tax advisers,” he said.

“It seems likely that the only businesses who will benefit from the measure, assuming it gets passed this month, will be those who coincidentally happened to make upgrades this year, rather than those who were incentivised to do so because of the scheme.”

Mr Ord said that an extension of the policy for a further two years would provide more certainty and time to make the right decisions for their businesses.

“The worst thing a business can do is rush into making big decisions, especially when it involves spending significant amounts of money,” he said.

CPA Australia’s Gavan Ord says the bill has yet to pass parliament and gave businesses little time to take advantage.

The small business energy incentive is designed for businesses with an annual turnover of less than $50m with an additional 20 per cent deduction on spending that supports electrification and more efficient use of energy.

The measure would help businesses acquire products such as new commercial fridges and induction cooktops, as well as upgrading gas heating and cooling systems to electricity. Up to $100,000 of total expenditure would be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

Australian Small Business and Family Enterprise ombudsman Bruce Billson said small and family businesses have been duped and treated poorly by squabbling in federal parliament that has failed to pass the law in a timely way. The Senate is next due to sit on June 24.

“It’s just not realistic, and it’s an insult to small businesses,” he said.

“We’re talking about a small or family business spending $100,000 to get the full value of this tax incentive. That’s a big commitment, and as recognised by the Government, the tax break may be the critical difference in being able to afford to do this.”

The ASBFEO, which was established in 2016 by the then federal government to assist and advocate for small businesses and family enterprises, said that if the legislation does not pass, small businesses would not be able to claim anything.

Businesses have been under mounting pressure in the past year amid headwinds from interest rate rises, inflation and a pullback in consumer spending.

The country is bracing for the highest rate of insolvencies since the depths of the 2008 Global Financial Crisis with 8742 insolvency appointments up to April 30, compared with 6200 during the same period a year ago.

Originally published as Labor faces calls from CPA Australia, ASBFEO to extend small business energy incentive