Are the fates of SMEs and rooftop solar intertwined amid Budget tailwinds?

Australia’s small and medium sized enterprises (SMEs) are set to gain from $1.5 billion in tax incentives and a slew of other Federal Budget benefits which also reserved $1 billion to help encourage the adoption of solar panels.

Australia’s small and medium sized enterprises (SMEs) are set to gain from $1.5 billion in tax incentives and a slew of other Federal Budget benefits which also reserved $1 billion to help encourage the adoption of solar panels.

Passed by Parliament on 21st June 2023, the $1.5 billion tax incentive is aimed at upskilling the workforce and improving digital and tech capacity of SMEs with a turnover below $50 million and is expected to benefit 3.8 million businesses.

Hailing the new incentives, the Government acknowledged the importance of the small business community to the economy and the need to create opportunities for the sector to grow. Treasurer Jim Chalmers believes it ‘will set Australia’s small businesses up for more success.’

The good news for SMEs started flowing earlier in the year when the Federal Budget 2023-24 introduced a host of benefits including a $20,000 instant asset write-off (per asset) threshold for businesses with an aggregated turnover of less than $10 million.

A tax break was introduced giving businesses with an annual turnover of less than $50 million access to a bonus 20% tax deduction on up to $100,000 of total expenditure on eligible assets that support electrification and more efficient use of energy.

Other benefits include $23.4 million funding to help train ‘cyber wardens’ to help improve cyber security measures and a $392.4 million Industry Growth Program to provide advice and matched funding to SMEs and start-ups.

Notably, the Industry Growth Program prioritises, among others, business initiatives focused on renewables and low emissions technologies, drawing a faint yet undeniable line connecting SMEs to the Australian Government’s plans for the nation’s energy sector.

Solar power’s time in the sun

With ambitions to make Australia a renewable energy superpower, the Government has committed $40 billion overall, more than half of which is allocated to modernising the electric grid, boosting energy performance and supporting electrification.

As part of the Federal Budget 2023-24, the Government is investing $1 billion to help provide low-cost loans for solar panels, double-glazing and other improvements aimed at making Australian homes more energy efficient.

In its Solar Report for 2023’s first quarter, the Australian Energy Council highlighted rooftop solar’s growing prominence in Australia’s transition to renewables. At the end of the quarter, rooftop solar accounted for 19.8 gigawatts of capacity, which compares to 23.3 gigawatts for coal generation.

Rooftop solar installations during the quarter are expected to amount to 92,000 new installations (800 megawatts). 2021 was a record year for installations with 349,122 added to the grid. Overall, nearly 3 million Australian households (27.3%) are harnessing the sun’s power through rooftop solar, making the country one of the global leaders in the solar market.

Currently, there are 7,461 businesses in Australia addressing the demand for solar panels among consumers. The number of these businesses has grown an average of 8.5% per year over the five years up to 2023.

With SMEs making up 98% of all businesses in Australia, the Government’s Budget 2023-24 may have set the stage for a convergence of the two sectors whose outlooks appear intertwined amid current market conditions.

We are continuously scanning the market for interesting businesses operating in sectors with opportunity. If you are interested in future investment opportunities within the SME and technology industry, register your interest and we will keep you updated.

Past performance is not a reliable indicator of future performance.

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