Additional comments from the Australian Greens

1.1While the Greens support the intention of this Bill, schedules 1 and 2 should not pass in their current form.

1.2The Small Business Energy Incentive is one component of the $1.7 billion in electrification and energy efficiency that the Greens secured through negotiations with the government on the gas price cap.

1.3On budget night this program was slated as a $314 million package.[1] In the explanatory memorandum, it was revised down to a $310 million package, but given we are currently five months into the only financial year that it is intended to operate, the cost of the package is likely to be much lower than this.

1.4Treasury forecasts were requested by the Committee, but have not been provided.

1.5It is difficult to escape the conclusion that this is a program that has been designed to try and avoid spending money.

1.6Firstly, it only runs until the end of this financial year, with only seven months remaining. That makes it extremely difficult for any comprehensive and methodical energy saving investments to occur. Most small business owners are just too busy to manage a project in these short time frames while they are still carrying on their business.

1.7As Mr Roberts of the National Electrical and Communications Association advised:

Basically, we're at a point now that anything other than a basic installation is going to really struggle to get past any planning processes and engineering designs, and anything that requires the cooperation of a body corporate or council is likely to drag out. There's going to be a lot of opportunity missed for quite decent projects to access that funding arrangement.[2]

1.8Secondly, as became clear during the hearings, Treasury and the Department of Climate Change, Energy, the Environment and Water (DCCEEW) have done little to promote awareness of this scheme amongst small and medium business owners.[3]

1.9Thirdly, the installation of solar panels is specifically excluded for no justifiable reason. It is understandable that the inclusion of solar panels would likely render them the dominant asset installed under the scheme. However solar installations are an integral part of creating a holistic energy efficient business when combined with storage, electric vehicle charging, heat pumps, insulation improvements and disconnecting from gas.

1.10Fourthly, the equipment has to be installed ready for use by 30 June 2024. This crunched timeline means the scheme - as currently proposed - could represent a significant safety risk as confirmed by Mr Roberts of National Electrical and Communications Association (NECA), the last thing the reputation of energy saving schemes need in this country is another rushed, quickly rolled out government program forced into a tight deadline with potential for safety issues.

1.11The Small Business Energy Incentive be extended to operate for three financial years, to expire on 30 June 2026.

1.12The exclusion of solar panels from the scheme should be amended to allow for the inclusion of solar PV where it is combined with a package of other energy upgrades and installation.

1.13Getting homes and small businesses off gas connections has to be a priority for any government with a stated commitment to net zero. Reducing gas demand is particularly important for the east coast market where gas shortfalls are forecast from 2027 onwards.

1.14However, businesses that replace their gas appliances and assets with electric ones will not reap the full economic benefits unless they also disconnect from the gas network. This is because the residual fixed cost component of a gas bill would keep being sent out to a small business so long as they remain connected to the gas network.

1.15Disconnection fees are currently set at $220 in Victoria[4] and around $1000 in other states.[5] While these fees are incidental to any asset purchases for a small business seeking to electrify their business, it is not clear under the legislation that these disconnection fees would be eligible for either the instant asset write off or the small business energy incentive.

1.16Conflicting High Court pronouncements also make it unclear whether a disconnection fee is a capital or operating expense. On the one hand, it could be argued the fee is a non-recurrent payment that produces an enduring benefit for the business as it is no longer required to pay gas supply and consumption charges to the provider.[6] On the other hand, it could be argued that, while the disconnection fee is a one-off expense, the fee is an ordinary business outgoing to reduce a businesses’ costs and is therefore a revenue expense.[7]

1.17To avoid doubt, the bill should be amended to make clear that any disconnection fees to remove a premises from the gas network should be eligible under the scheme.

1.18The small business energy incentive scheme works as a 20 per cent bonus on top of any existing asset deduction scheme. To ensure predictability and enable thoughtful planning in electrification upgrades, the underlying instant asset write off in schedule 1 should also be extended and align to the small business energy incentive.

1.19Rather than legislating the instant asset write off for the next seven months and then legislate it again next year, it should also be extended to give small business investment certainty that the parameters won’t soon change.

1.20The Australian Greens are also open to increasing the level of the instant asset write off above the current $20000 to support more comprehensive energy upgrades.

1.21The Instant Asset Write Off should be extended to operate for three financial years, to expire on 30 June 2026.

Senator Nick McKim

Member

Greens Senator for Tasmania

Footnotes

[1]The Hon Dr Jim Chalmers MP, Treasurer, ‘Small Business Energy Incentive’, Media Release, 30April2023 (available at https://ministers.treasury.gov.au/ministers/jim-chalmers-2022/media-releases/small-business-energy-incentive).

[2]Mr Roberts, NECA, Committee Hansard, 13 November 2023, p. 4.

[3]Mr Tina Smith, Director, Personal and Small Business Tax Branch, Department of the Treasury, Committee Hansard, 13 November 2023, p. 20.

[4]Australian Energy Regulator, ‘AER decision supports Victorian gas consumers in energy transition’, Media Release, 2 June 2023 (available at https://www.aer.gov.au/news/articles/news-releases/aer-decision-supports-victorian-gas-consumers-energy-transition).

[5]Sophie Vorrath, ‘Fossil gas death spiral: Regulator caps exit fee to “socialise” cost of mass disconnection’, Renew Economy: Clean Energy News and Analysis, 2 June 2023 (available at https://reneweconomy.com.au/fossil-gas-death-spiral-regulator-sets-exit-fee-to-socialise-cost-of-mass-disconnection/).

[6]Sun Newspapers Ltd and Associated Newspapers Ltd v Federal Commissioner of Taxation (1938) 61CLR33, 155.

[7]Sun Newspapers Ltd and Associated Newspapers Ltd v Federal Commissioner of Taxation (1938) 61CLR33, 361; G. P. International Pipecoaters Pty Ltd v Federal Commissioner of Taxation (1990) 170 CLR 124, 137.