Budget 2015: Coalition opens solar market to “Tony’s Tradies”

rooftop solar

The Abbott government’s 2015 Budget has potentially given a major boost to the rooftop solar industry in Australia with the announcement of a $20,000 tax break for small businesses, or “Tony’s Tradies” as the prime minister is calling them.

The deal means that businesses with revenue of less than $2 million a year can buy any machinery or equipment – including solar modules and maybe even battery storage related to their business.

The amount of individual pieces of equipment of up to $20,000 will be 100 per cent tax deductable. The scheme will be in place for another two years

It’s probably the best policy news that the solar industry has received since the election of the Abbott government, given the move by states to reduce feed in tariffs, of pricing regulators to raise fixed charges, and attempts – so far thwarted – by the federal government to cut or phase out the small scale component of the renewable energy target.

“I hope there’ll be lots of small business people thinking now ‘what have I always wanted to buy?” Abbott said in a TV interview on Wednesday.

“Is it a new ute, is it a new bit of equipment, a new fridge or freezer for my shop or restaurant, well you can go out and buy it now and write it off straight away against your tax,” Abbott said.

For many, it could be solar modules, given the ability of solar arrays to reduce and lock in electricity costs.

The sum of $20,000 is enough to buy a solar PV array of around 10kW, possibly more according to some quotes. And/or, it could account for two or three Tesla battery storage devices, or the equivalent from rival manufacturers who now insist they can match Tesla on price.

“Small businesses across Australia can install solar systems, slash their power bills and get an immediate tax write-off of their asset,” said John Grimes, the CEO of the Australian Solar Council. “It is the best use of capital.”

The question for some will be to what extent small business with revenue under $2 million have the roofspace to take advantage of it. It could rule out many manufacturers with larger premises, but Grimes said it could suit businesses such as panel beaters, petrol stations, and small supermarkets.

Ric Brazzale, from Green Energy Trading, says it is a great opportunity for businesses in regional areas, where businesses were more likely to own their own roofspace, and where they pay more for their power.

The tax benefit means that one third of the cost of solar systems will come from the renewable energy market, and another one third from the Tax office – at least for those with a tax bill. “It means that for small businesses, PV is now an even more compelling proposition, given one third of the cost will be recovered from the tax office,” Brazzale said.

The tax benefit is welcome news for the solar industry, given the Coalition government’s announced intention to hold yet another review of the renewable energy target, despite promises not to.

The solar industry says this could put the small scale solar target back on the table, after political pressure forced the government to back off from proposals to slash the small scale target altogether, under pressure from incumbent utilities and fossil fuel generators.

Commercial scale solar – above 10kW – is the fastest growing component of the solar industry in Australia, and promises to be massively disruptive to the incumbent industry.

Bloomberg New Energy Finance on Wednesday says that it will shortly release updated solar forecasts for behind the meter solar generation in Australia.

BNEF Australia head Kobad Bhavnagri said the previous forecast of 18GW of rooftop solar by 2030 (from 4.2GW now) would now be upgraded. He said that between 40-70 per cent of available building stock would have solar within a decade, and all building stock by 2030.

“We will be very surprised if everyone does not have solar in the same way that everyone has a smart phone now,” Bhavnagri said.

This would be massively disruptive. Since 2008, when the solar market started to take off, the value of electricity (the price in the wholesale market) has halved. That’s because of the massive over capacity built – mostly coal and gas, and not renewable – in anticipation of rising demand. But rooftop solar has caused a reduction in demand.

Bhavnagri said he expected the annual installations in rooftop solar to be between 700MW and 1,100MW per year , with commercial solar to be strong and an emerging industrial segment, as large corporates and industrial users moved into the market.

“It is an unstoppable beast,” Bhavnagri said. And it just got another leg up from the government, intentionally or not.

 

Comments

12 responses to “Budget 2015: Coalition opens solar market to “Tony’s Tradies””

  1. RobS Avatar
    RobS

    That would be hilarious if thousands of businesses use their $20,000 write off to install commercial solar, it would be the biggest solar subsidy in Australian history and be entirely accidental.

    1. Ken Dyer Avatar
      Ken Dyer

      And you can bet that hundreds, if not thousands are registering their ABN numbers right now, scrounging up $20,000 to put in the new business account they just opened, so they can purchase solar panels and batteries for their place of business, which surprise, surprise, occupies the same premises as the family home. Well done, Tony and Joe, it might just get you re-elected, not! The coal industry and Maurice Newman must be furious…..what a conspiracy!

      1. Mio Ristic Avatar
        Mio Ristic

        As far as I understood they said businesses that are incorporated, so no sloe traders are eligible.

    2. Rob G Avatar
      Rob G

      It’s the kind of blunder we’ve been hoping for. It will be too late to stop it when Abbott finally realises.

      1. Aaron S Avatar
        Aaron S

        you have to have a business that makes $20K profit first to be able to off set the $20K so you don’t pay Tax on the 20K. Also a business that has a turn over of less than $2 million that own the building they work out of are harder to find than you think.
        If a business declares a $20K profit they will pay 30% in TAX = $6K. So a $20K PV system would cost $14K.

        1. Steve159 Avatar
          Steve159

          It’s not just a simple mathematical (accounting) issue — it’s psychological as well, in that a small business owner will start thinking about possibilities for purchasing items that were previously over the 6k limit that was introduced by labor). I would think a lot of small businesses frequently run at a loss (insofar as losses accrue and can be offset against profitable years) so this will assist in that regard.

    3. Ian Avatar
      Ian

      Bigger users of electricity could buy more than one solar system, each worth less than $20000. These could work independently and be considered as separate purchases for tax write-off purposes!

  2. Phil Gorman Avatar
    Phil Gorman

    Looks like an own goal; deeply satisfying!

    1. Colin Easton Avatar
      Colin Easton

      perhaps we’d better not chortle too loudly lest they (the non-believers) hear us and put a “not for solar” caveat on Tony’s Tradies Taxbreak.

      1. RobS Avatar
        RobS

        That would be too blatant even for them, notice they studiously avoided scrapping the RET yet effectively achieved exactly that by simply keeping it wrapped up in a review for years on end. This government is at least a little bit nuanced about how they stifle progress and development and favor their pet industries.

  3. Jacob Avatar
    Jacob

    This tax break summarises what is wrong with AUS.

    While Israel, Singapore, Ireland, export computer chips and cutting edge electronics.

    Australia’s finance minister gives tax breaks to buy $20k of imported stuff.

    1. RobS Avatar
      RobS

      Yes it would have been doubly effective had they specified the tax break was only on Australian manufactured items, stimulates the small business making the purchase, the retailer and the manufacturer, that would require foresight and sensible planning by the LNP though

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