Small business can plug into power relief

Rising utility bills are putting profits under pressure for more than one in three small businesses, according to a 2023 survey by MYOB, the accounting software provider.

So, when the federal budget included energy savings of up to $650 for eligible small businesses from July 2023, their owners undoubtedly breathed a sigh of relief.

As is often the case, though, the devil is in the detail.

The key words are “eligible” and “up to” – not every small business will share in the spoils.

The government will chip in $325 towards power bill relief for each small business nationally, though the savings could be far higher depending on your location.

In NSW, Queensland, Western Australia, South Australia, Tasmania and the Northern Territory, the state/territory government will provide a co-contribution of $325.

Coupled with the federal relief, this means a saving of $650 per business.

In the ACT, the government is lowering electricity tariffs for businesses through its large-scale feed-in tariff scheme, which will provide direct bill relief, with the savings expected to average around $624 annually per small business. This is on top of the Commonwealth’s $325.

In Victoria, small businesses can expect to receive only the federal government’s $325.

If your business is eligible, the savings will be automatically deducted from power bills from July 1, 2023.

Who is eligible?

To be eligible for the federal relief, your business must be separately metered, which will likely eliminate the multitude of home-based businesses operating across the country, though some may be eligible for household energy relief.

Eligibility also hinges on how much power your business consumes each year.

The annual limits are: 40MWh in Victoria; 50MWh in WA; 100MWh in the ACT, NSW and Qld; 150MWh in Tasmania; 160MWh in the NT and SA.

These caps can be a good incentive for businesses to think about replacing outdated plant and equipment that may be power-hungry.

20% tax deduction maximum bang for your buck, so a good starting point can be to identify the energy guzzlers in your business.

$50 million have 12 months to take advantage of a new tax break – the Small Business Energy Incentive.

This is a bonus 20% tax deduction available when your business invests in assets that support electrification and more efficient use of energy.

It’s only available until June 30, 2024 and a maximum spend of $100,000 applies, meaning the bonus tax deduction is capped at $20,000.

These will vary between enterprises but, as a rule, plant and equipment, heating/cooling and lighting tend to drain the most power.

Cut usage and cost

Fortunately, savings on energy can be made through two steps that cost nothing.

First, think about load shifting, which means switching energy-consuming activities to a time of day when tariffs are cheaper.

Where practical, use non-critical appliances (such as washing machines and dishwashers) out of peak times.

This assumes your business pays a time-of-use tariff – check your electricity plan to see if that’s the case.

Another option is to change behaviours, for example by encouraging employees to switch off lights and other appliances, including printers and computers, at the end of each day.

Given the brief life span of the incentive, it’s important to get

While a tax break is always welcome, the weak spot of the Small Business Energy Incentive is that enterprises need to spend money to save money – which, for some small operations, simply won’t be an option.