Yes, a commercial solar panel system is worth buying if you are a business owner who leases their premises.
That’s because most businesses consume the majority of their electricity between 9am and 5pm, which is when solar panels work the hardest. By using free solar to power your business, you avoid paying high grid electricity rates; this is where the biggest savings are to be made with solar.
But that’s not all there is to it. There are also tax incentives and government rebates for business owners who install solar on their leased premises. Combined, these financial incentives can shorten the payback on solar to as quick as 1-2 years.
This blog reviews the main financial incentives for business owners to install solar on their leased premises:
- Instant asset write-off
- Small-scale technology certificates
- State government solar rebates
Instant asset write-off
Businesses with a turnover of up to $5 billion are entitled to immediately deduct the full cost of eligible depreciable assets like a solar panel system and battery storage.
In the Federal Budget 2021-22, the Government announced an extension of the instant asset write-off by one year to 30 June 2023.
How it works
- The eligible asset must be purchased after 6 October 2020 and installed ready for use by 30 June 2022 (this will be extended to 30 June 2023 if the announced changes are enacted).
- You may be able to borrow funds to finance the solar system and still be allowed to claim the instant asset write-off regardless of whether you own or rent your premises.
- Deduction claims may be made for the year in which the equipment is used or installed ready for use. This may be the same year in which you finance the equipment.
- You could install several solar systems (within the allowed timeframe) and still be entitled to claim the entire project as an instant asset write-off within the same financial year.
This means you could arrange lease finance for a solar panel system through SolarRun (for a period of your choosing) and still claim the instant asset write-off in the 2021-2022 financial year. Or, if more suitable, install the system with lease finance the following financial year (assuming the changes in the Budget are enacted) and claim instant asset-write off in 2022-2023.
What is the instant asset write-off worth?
How much would a small or medium size business save on solar using the instant asset write-off and other government incentives?
Let’s take the example of a 39kW solar panel system with a 30kW solar inverter installed in Melbourne.
|Gross system value||$40,000|
|Instant asset write-off (30% company tax rate)||$10,500|
|Small-scale Technology Certificates (STCs)||$15,300|
|Net system value||$9,200|
Note: All figures are approximates as of May 2022
As this example shows, the business would save around $25,800 on the cost of a 39kW solar power system with a combination of the instant asset-write off and federal government STCs.
With these financial incentives, the projected payback on a 39kW solar panel system for a business that consumes at least 50 per cent of their solar power is around two years.
This demonstrates that on a commercial lease of five or seven years, there’s potential to get the full savings from solar for at least three years on a typical commercial lease – assuming the solar is installed towards the beginning of the lease.
Small-scale technology certificates
If you install a solar panel system up to 100kW in size, it should qualify for Small-scale Technology Certificates or STCs. This incentive is provided by the Federal Government and effectively works as a point-of-sale discount reducing the purchase cost of a solar system. It is available on eligible solar panel systems installed by an accredited solar retailer/installer.
A business owner leasing their premises will qualify for STCs for their solar panel system – you don’t need to own the building to get the STCs.
The value of STCs depends on where in Australia your business is located. It also depends on the date your system is installed and the market value of STCs at the time.
Value of STC discount for 40kW and 100kW commercial solar systems (approx)
|40kW Solar System STC discount||100kw Solar System STC discount|
|Amount STC Certificates||STC Rebate amount ex GST||Amount STC Certificates||STC Rebate amount ex GST|
As of May 2022
If your solar panel system is larger than 100kW, it should quality for Large-scale Generation Certificates, or LGCs. LGCs work differently from STCs. Instead of receiving an upfront discount on the system price, LGCs provide your business with a regular revenue stream that helps to offset the cost of the solar system over time.
Both STCs and LGCs are gradually reducing in value each year and will be phased out completely by 31 December 2030. By acting now, you’ll be able to get the maximum value from this government solar incentive before the value drops.
State government rebates
In certain states and territories including Victoria and the ACT, there are state government rebates for businesses installing solar panels or battery storage on the commercial premises that they lease. In addition, there are state government interest-free solar loans that further reduce the upfront cost of solar.
As always with government rebates, it’s a good idea to check them out and find out if there’s an expiry date. Certainly, the Victorian solar panels rebate for businesses – currently worth $3,500 – will drop 50 per cent in value once the current allocation has run out.
With the federal STC rebate and tax incentive, as well as state rebates and interest-free loans, there’s never been a better time for businesses – including those who lease their premises – to invest in solar.
How much could your business save with solar?
If you’d like to know how much your business could save with solar, get in touch for a quote.
We can advise on the rebates and incentives that your business may qualify for – and what they are worth. We’ll also provide a quote that shows the bills savings and payback you could expect from a solar system installed on your premises.
At SolarRun, we are experts in commercial solar – from smaller 20-30kW systems up to 100kW+. And as one of Australia’s largest solar retailers, we have the buying power to provide our customers with the best prices for high quality solar systems.
Boost your bottom line by going solar. Talk to us today.