What doesn’t qualify?
Certain kinds of assets and improvements are not eligible for the bonus deduction, including where the asset or improvement uses a fossil fuel. So, hybrids are out. Solar panels and motor vehicles are also excluded.
In addition, the following assets are specifically excluded from the rules:
- Assets, and expenditure on assets, that can use a fossil fuel;
- Assets, and expenditure on assets, which have the sole or predominant purpose of generating electricity (such as solar photovoltaic panels);
- Capital works (such as buildings and structural improvements);
- Motor vehicles (including hybrid and electric vehicles) and expenditure on motor vehicles;
- Assets and expenditure on an asset where expenditure on the asset is allocated to a software development pool; and
- Financing costs, including interest, payments in the nature of interest and expenses of borrowing.
What does qualify?
The legislation contains a few examples of what would qualify:
- Electrifying heating and cooling systems
- Upgrading to more efficient fridges and induction cooktops (for example replacing gas cook tops)
- Installing batteries and heat pumps
- Installing an electric reverse cycle air conditioner instead of a gas heater
- Replacing a coffee machine with a more energy efficient coffee machine if the manufacturer’s electricity consumption information supports this – keep the documentation!
- Thermal storage that can store heat or cold from a renewable source
- Solar thermal hot water system (assuming it meets the other criteria)
The legislation to implement the energy incentive is before Parliament. We’ll keep you updated on its progress. If you intend to make a major outlay to take advantage of the bonus deduction, talk to us first just to make sure it qualifies.
