Announced in last year’s Federal Budget was a stimulus package for small businesses in the form of an instant write-off on capital equipment purchased up to the value of $20,000. This measure replaces the previous instant asset write-off threshold of $1,000.
This new ATO incentive started on the 12th May 2015 and will end on 30th June 2017. The offer applies to any business that has a turnover of less than $2m per annum. This ATO incentive can be used to purchase solar PV equipment as long as that solar equipment is installed on the premises of that business making the capital equipment purchase.
If your business is facing the prospect of paying the Government tax on financial year-end company profits then this asset write-off allows you to spend taxable dollars on a commercial solar system. The deduction reduces your taxable income by the amount claimed. The tax payable is reduced by applying the relevant tax rate to the amount claimed.
So the rationale is that if you are facing the prospect of paying over to the ATO an amount of corporate tax based on company year-end profits then it is worth considering reducing the amount of tax payable by making an asset purchase up to the value of $20,000. Businesses can use this $20,000 asset write-off to invest in capital equipment that can help the business make money (as in new machinery) or it can be used to invest in a new solar PV system which can save you money as in power bills.
A commercial solar PV system is a VERY smart capital equipment purchase as it will allow a business to make significant savings on energy costs for many years into the future. Energy bills are an unfortunate but necessary cost of running a business hence a commercial solar system can reduce these fixed operational costs and free up cash flow.
Line item A is the pre-GST total solar system cost including installation. This is the asset write-off figure used to calculate your deduction benefit.
Line item B. The $20,000 asset write-off is not inclusive of GST –
Line item C. The business owner is still able to access the Federal Government’s solar incentive rebate (energy certificates) applicable to this commercial solar system. Note, businesses will need to show this incentive (rebate) as income.
Line item D. The business owner would pay our company the after STC system cost.
Under this scenario, not only are you able to maximise your $20,000 asset write-off to the full with a large (10kW) commercial solar PV installation, but you are also able to access a Federal Solar Incentive meaning that your out-of-pocket cost is considerably less than the write-off figure.
A 10kW commercial solar PV system has the potential to offer energy bill savings to the tune of $3900 per annum* (*assuming 100% usage and cost of power @ $0.25 per kWh)
We recommend that anyone looking to invest in a commercial solar system as part of this $20,000 asset write-off incentive do speak to their financial advisor or accountant to determine if they can benefit from this ATO small business tax incentive.
If you would like a quote on commercial solar PV system please use the contact form on this page or call us in the office on 02 6652 2718.
This article was written by Mark McClurg