Australian Small Businesses Take the Lead in Sustainable Asset Investing

Australian businesses are increasing their investments in greener assets despite economic uncertainties, as per data from the Commonwealth Bank of Australia.

Business spending on electric vehicle fleets grew by over 325 percent, while spending on hybrid motor vehicles saw a 120 percent increase compared to the previous year. CommBank’s business bank witnessed a 22 percent growth in total vehicle and equipment financing during this period.

Small businesses are spearheading green investments, with electric vehicle financing in the sector seeing a significant surge of 346 percent, leveraging CommBank’s Green Vehicle and Equipment Finance.

In addition, manufacturers also increased their investments by 24 percent in new assets like manufacturing lines, forklifts, and scissor lifts.

CommBank observed a 42 percent increase in funding activity from regional manufacturers and agribusinesses on new assets, with purchases ranging from moulding machines to food manufacturing machinery.

“Companies are also ramping up their investment in energy transition, with a focus on improving energy efficiency through equipment upgrades and increased adoption of electrified transportation and replacement fleets,” said Grant Cairns, CBA’s Executive General Manager of Business Lending.

“Part of this shift is driven by customers taking advantage of government rebates and subsidies and looking at longer-term actions to reduce costs and demonstrate returns on investment,” Cairns added.

Cairns expressed expectations that small businesses would continue to enhance their cash flow through asset financing, especially after the Albanese government’s recent federal budget provisions for businesses.

“We welcome the extension of the federal government’s instant asset write-off scheme (IAWO) as a way to help free up cash flow for small businesses,” Cairns stated.

“As small businesses embrace the energy transition, as evidenced by the significant increase in green asset financing over the past year, government support such as the IAWO could help drive this trend.”

Small Businesses Need Certainty

Bruce Billson, Australian Small Business and Family Enterprise Ombudsman, has been urging the federal parliament to provide certainty to small businesses regarding two crucial tax breaks announced in the previous year’s budget. These measures pertain to the instant asset write-off and a tax incentive for energy efficiency upgrades.

The federal budget includes a continuation of a $20,000 instant asset write-off for small businesses with turnover under $10 million, along with a $325 rebate for energy relief for up to a million small businesses.

“The scheme requires eligible assets or upgrades to be first used or installed ready for use between July 1, 2023, and June 30, 2024, but with the legislation still not passed time is fast running out for small businesses to meet that deadline,” Billson emphasized.

“This uncertainty has highlighted the need for predictability and certainty so a small business can plan in a sure-footed way for important investments that uplift the capacity, the productivity and drive innovation in their business.”

CEO of the Institute of Public Accountants (IPA), Andrew Conway, previously noted that business owners may have lost interest in investing in aging capital assets until they see an improvement in profitability.

On the other hand, the small business energy incentive worth up to $20,000 announced in April last year will provide a further 20 percent depreciation for eligible assets that support electrification and more efficient use of energy by small businesses with an annual turnover of less than $50 million.

“Right now, we need to be energizing enterprise. We need to be providing more encouragement for people to turn an idea into an investment and to make that significant decision to turn scarce resources into new capability, new equipment, new technology to aid in the success of that enterprise and the livelihoods that depend upon it,” Ombudsman Billson explained.

“Having that encouragement to invest in new equipment, new plant and equipment, new technology is a crucial signal, but what’s crucial is the certainty that these tax breaks are genuine.”