My Business readers have asked whether the installation of solar power systems can be claimed under $20,000 instant asset write-off. We asked the ATO to shed light on the issue.
Solar installations have soared in popularity across Australia, as skyrocketing energy prices and increasing awareness of our environmental impacts cause businesses and households to look for more sustainable and cost-effective alternatives.
Yet they don’t come cheap, costing thousands of dollars for a small, basic system.
Melbourne firm Natures Organics recently turned on a massive system spanning 17,000 sqm on the roof of its factory, at a cost of $3 million.
So it is not surprising that small businesses want to know whether such systems count as an asset under the $20,000 instant write-off scheme, and as such, whether they can receive an immediate tax break on the installation cost.
Yes, it can be deducted
A spokesperson for the Australian Taxation Office confirmed to My Business that solar power systems are eligible for the tax break, provided it is legitimately used for business.
“The cost of a solar power system can be claimed under the $20,000 instant asset write-off where the system costs less than $20,000 and it is bought and used by an eligible small business to generate electricity for use in the business,” the spokesperson said.
“Where a portion of the electricity generated by the system is used for private purposes (for example, in a home-based business), the cost of the system must be apportioned when claiming the instant asset write-off.
“A reasonable method of apportionment could be the ratio of electricity consumed by the household compared to the electricity consumed by the business.”
Adam Zuchetti is the editor of My Business, and has steered the publication’s editorial direction since early 2016.