On 20 January 2011, the Government released a consultation paper on the proposed Tax Breaks for Green Buildings program.  From 1 July 2011, businesses investing in eligible assets or capital works which successfully improve the energy efficiency of their existing buildings from 2 stars or lower to 4 stars or higher (in accordance with NABERS Energy rating protocols) will be eligible for a once-off bonus tax deduction of 50 per cent of the cost of the improvements.  The initiative is aimed at encouraging businesses to improve their energy efficiency and is welcomed by the commercial property industry.

To be eligible, you must own or part-own an eligible existing office, hotel or shopping centre within Australia.  Eligible buildings include:

• office buildings of net lettable area greater than 2,000 square metres;
• shopping centres of a gross lettable area that is retail of 15,000 square metres; and
• business hotels with certain characteristics.
  

Furthermore, the entity must be able to demonstrate an ability to fund the remaining cost of the project that will not be funded by the tax incentive.

Taxpayers wanting to claim the tax incentive will be required to obtain a NABERS assessment. The NABERS assessment is required before and after the proposed retrofit to demonstrate that the NABERS rating has improved from a rating of 2 stars or lower to a 4 star rating and hence verify energy and emissions savings.

Expenditure eligible for the tax incentive is proposed to include both capital and non capital expenditure that forms part of the total cost of the retrofit. However, it is likely that the Government will introduce a cap on non-capital expenditure eligible for the grant. To be eligible, expenditure must be incurred between 1 July 2011 and 30 June 2015 (inclusive) and must be approved as part of the pre-installation application and registration process. This agreed expenditure will not be increased even if actual expenditure incurred is higher.  Contracts for the associated works should not be entered into until the taxpayer has received confirmation that its application for the pre-installation registration has been successful.

Taxpayers who may be eligible for the tax break are encouraged to review the consultation paper and provide feedback. Moore Stephens would be happy to assist with this. The consultation paper and information on consultation information sessions can be viewed on the Department of climate change and energy efficiency website: http://www.climatechange.gov.au/government/initiatives/tax-breaks-for-green-buildings.aspx

Authors: Abi Chellapen and Roger Crotty, Moore Stephens Melbourne