A couple of significant tax breaks are currently available and, if your small retail business meets the relevant criteria, they could represent a potential saving of thousands of dollars. As both of these tax breaks expire on 30 June 2024, it is essential that you undertake any qualifying expenditure before that date in order to qualify.

Tax boost for small businesses to invest in energy-saving technology

The Small Business Energy Incentive is designed to help small‑ and medium‑sized businesses to invest in their energy transformation by giving a bonus 20% tax deduction for all eligible purchases.

This will provide businesses with an annual turnover of less than $50 million with an additional 20 per cent deduction on spending that supports electrification and more efficient use of energy.

Businesses can claim the bonus deduction on expenditure such as electrifying their heating and cooling systems, upgrading to more efficient fridges and induction cooktops, and installing batteries and heat pumps.

Restaurants, hairdressers, retailers and real estate agents are just some of the small businesses that will benefit from the move.

However, certain exclusions will apply, such as:

  • electric vehicles;
  • renewable electricity generation assets;
  • capital works; and
  • assets that are not connected to the electricity grid and use fossil fuels.

Up to $100,000 of total expenditure will be eligible for the incentive, with the maximum bonus tax deduction being $20,000 per business.

You generally claim the 20% bonus deduction in the year the expenses are incurred, regardless of whether the expenditure is on items that are actually to be depreciated or not.

Eligible assets or upgrades will need to be first used or installed ready for use between 1 July 2023 and 30 June 2024.

Note that this measure, although we are over half-way through the period covered by it, hasn’t (at the time of writing) been approved by Parliament and therefore there is a (small) chance that it may never become law! This is a risk that any small business needs to weigh up before investing thousands of dollars in qualifying expenditure.

Tax boost for expenditure on skills and training

A similar tax boost is also be available for certain eligible training expenditure for your employees.

Small businesses with an aggregated annual turnover of less than $50 million will be entitled to an additional 20% tax deduction for external training courses delivered to employees by registered training providers. Unlike the energy-saving boost (above), there is no maximum amount which can be spent to qualify for the bonus deduction.

The boost applies to eligible expenditure incurred through until 30 June 2024.

The bonus deduction is available for expenditure for the provision of training to one or more employees of your business. The training provider must meet certain registration criteria for the bonus deduction. You can check for registered providers at training.gov.au – Home page.

Training expenses can include incidental costs related to the provision of training, provided they are charged by the registered training provider, such as the cost of books or equipment needed for the course.

You can’t claim expenditure for:

  • training of non-employee business owners such as sole traders, partners in a partnership or independent contractors
  • costs added on an invoice by an intermediary on top of the cost of training, such as commissions or fees, as they are not charged directly or indirectly by the registered training provider.

You generally claim the bonus 20% deduction for expenditure incurred in the year ended 30 June 2024 through your tax return, at the same time as you claim a deduction for the other 100%. 

Unlike the energy saving boost, this incentive has been approved by Parliament and is therefore law.

Mark Chapman is director of tax communications at H&R Block.