INSTANT ASSET WRITE-OFF FOR COMMERCIAL SOLAR INSTALLATIONS
The Australian Government announced the most comprehensive expansion of the Instant Asset Write-Off scheme. Here is why your business should invest in solar panels now.
Update: As of 6 October 2020, the Government announced the most comprehensive expansion of the Instant Asset Write-Off scheme that has increased from $150k to UNLIMITED and will run until 30 June 2022. The new extension and expansion of Australia’s instant asset write-off scheme could be of significant benefit to businesses considering installing solar power.
On 6 October, Australia’s 2020-21 Budget was handed down by federal Treasurer Josh Frydenberg who committed a further $98 billion, on top of the $257 billion that has already been directly pumped into economic support aimed at cushioning the blow of COVID-19 and strengthening the nation’s recovery from the pandemic. Amongst the measures aimed at helping to buoy Australia’s economy, the most talked about is the move to further expand its instant asset write-off tax break initiative for businesses. Now, the government will allow businesses to write off the full value of assets they purchase. This budget along with some of the other recent announcements by the federal government creates a compelling argument to capitalise on the new generous government incentives and invest in solar.
It is the single biggest initiative the Government has announced to stimulate the economy
The Small-Business instant asset write-off was first introduced in the 2015‑16 Budget, and the threshold was $30,000 and increased earlier this year to $150,000. More recently it has been upped again in response to the Covid-19 recovery plan to an unlimited valuation allowing businesses to immediately fully depreciate eligible asset purchases – including solar power systems. As part of the Government Economic Stimulus Package, Businesses with a turnover of up to $5 billion will be able to immediately deduct the full cost of eligible depreciable assets, like a commercial solar system, acquired from 6 October 2020 and first used or installed by 30 June 2022. New solar and energy efficient equipment is included as well as improvements to existing equipment and infrastructure, e.g. upgrading an existing solar system.
If you have purchased or are planning to purchase a solar system for your business, you may be eligible to claim an immediate deduction. The following tips can help you get your instant asset write-off claim right:
- Check if you are an eligible business on the ATO website here
- The solar system must be first used or installed ready for use before 30 June 2022.
- If your solar system is for a mix of business and private use, you can only claim the business portion
- If you do not use the simplified depreciation rules, you may be eligible to deduct an amount using accelerated depreciation for your solar system.
Instant Asset Write-off for Commercial Solar Systems – Everything You Need To Know:
- Businesses and organisations with annual revenue of up to $5 billion are eligible.
- Under the newly expanded scheme, ABN holders can now claim for the full cost of an eligible asset (previously only up to $150k) that is first used or installed before 30 June 2022.
- Venergy offers commercial payment plans that can be used to finance the purchase of the solar system and still allow the instant asset write-off to be claimed whether you own or rent the building.
- Because the policy is based on individual assets you could install the multiple solar systems before 30 June 2022 and still be able to claim the entire project as an instant asset write-off.
$150,000 Can Easily Pay for 100 Kilowatts of Solar Power
So what is the practical application of this incentive for small and medium businesses considering solar? Let’s break it down:
Based on a typical 100 kWp system you could expect:
Gross System Value – $150,000
Asset Write Off Tax Benefit (30% company tax rate) + $45,000
Small Scale Trading Certificate Rebate (STC) + $50,000
Net System Value = $55,000
The projected payback on 100kW system is 1-2 Years.
For a 100kW system, the renewable energy target already provides a ‘green benefit’ of some $50,000 towards your move to cheaper, renewable energy. With an immediate tax deduction introduced through the stimulus package, it is possible to reduce your year 1 cash flow by a further $45,000* for systems purchased by eligible businesses before 30 June 2022.
The purchase of a Solar Solution for your business is a sensible way to redirect your cash flow away from paying future Tax Liabilities and Electricity bills
Solar A Good Fit For Small and Medium-sized Businesses
With the generous federal government incentives, it is no surprise that the adoption of solar energy continues to rise. As of 30 June 2020, there were over 2.46 million PV installations in Australia, with a combined capacity of over 17.6 gigawatts.
Join the thousands of businesses that have already taken advantage of the benefits of switching to solar power. Venergy Australia offers businesses a clear pathway to achieving these outcomes. Contact us today to discuss options for your business for a straightforward turn-key solution.
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