SMEs face obstacles in Chalmers’ $20k tax break for installing solar and more

The Albanese government’s pre-budget announcement of $20,000 for SMEs who electrify everything may not be everything it’s cracked up to be, critics say, citing obstacles like labour shortages, a short deadline, and an ageing business population compared to others in the Asia-Pacific region.

Treasurer Jim Chalmers announced SMEs could claim up to $20,000 to install solar panels, electrify their cooling and heating, install batteries and heat pumps, and invest in induction cooktops to replace gas in a bid to incentify more sustainable energy use in the business sector.

“This incentive is all about helping small business save energy and save on their energy bills, support that comes on top of the direct energy bill relief for small businesses that will be a centrepiece of the budget,” Chalmers said.

The Small Business Energy Incentive can be accessed by up to 3.8 million businesses, he added says, as long as they have a turnover of up to $50 million and invest up to $100,000 to swap out fossil fuel energy and technology.

But it means a hefty investment upfront. In January, the owner and head chef of Provenance Restaurant & Accommodation in Beechworth said he’d received a quote to electrify his small restaurant kitchen to the tune of $45,000.

If I could afford to I would change my small restaurant kitchen to induction tomorrow. Last quote was 45k.
It is great there is awareness about the toxicity of gas, but let's not mention the elephant in the room- the charcoal and wood fired grills that so many kitchens now have

— Michael Ryan (@theprovenance) January 18, 2023

CPA Australia’s business policy expert Gavan Ord said many would struggle to find the upfront cash required to electrify everything, telling SmartCompany that a survey showed utility costs are among the biggest concerns for SMEs right now.

SMEs are cash-strapped and ageing

In announcing the plan, Energy Minister Chris Bowen said many small business owners wanted to electrify their operations and the incentive would unlock “medium and long-term” savings on energy bills across the country.

Ord questioned whether medium-term solutions were the best way to assist SMEs as they grapple with economic uncertainty “as well as rising prices, higher interest rates and skilled worker shortages”.

“This new scheme will not solve the more immediate concern for small businesses currently struggling with their viability. We hope this is not the only announcement to support small business in the upcoming budget.”

Ord also queried the deadline for the Small Business Energy Incentive, saying some SMEs would benefit by acting fast but for others, it was “unfortunate that the scheme only runs for one year”.

“With shortages of tradespeople, suppliers and equipment, we expect businesses may struggle to ensure they meet the government’s timeline,” he said.

A survey commissioned by the Australian Industry Group found 90% of CEOs expect staffing shortages this year as the tight labour market is squeezed by a low unemployment rate of just 3.4% following low migration during the pandemic years.

Ord said most business owners would need to prepare a business case, which “will be a challenge for some small businesses” particularly those with older generations at the helm of the operations.

“Australia’s small business owners are much older than others in the Asia-Pacific region and are less likely to innovate. We are concerned that this will hold back Australia’s business dynamism,” Ord said.

Still waiting on digital skills boost

The $20k rebate for electrifying operations comes nearly twelve months after the Morrison government announced twin tax incentives to help small businesses compete in the digital economy, known as ‘The Small Business Technology Investment Boost’ and ‘The Small Business Skills and Training Boost’.

Business expenses and depreciating assets like “portable payment devices, cyber security systems or subscriptions to cloud-based services” would be covered, the ATO said at the time, while budget documents stated eligible “external training courses will need to be provided to employees in Australia or online, and delivered by entities registered in Australia.”

However, both March 2022 Federal Budget policies are yet to pass Parliament and are due to expire within the next 60 days. In a statement, MYOB Chief Employee Experience Officer Helen Lea urged the government to act, saying SMEs need the “confidence to invest and grow”.

“We encourage the government to both legislate and extend the Technology Investment Boost and the Skills and Training Boost, to enable SMEs to make the most of the benefits afforded by digital tools,” said Lea.

“Ensuring all small businesses — and the 7.4 million Australians they employ — have access to digital tools, and the skills to use them, is essential to building a resilient economy.”