Benefits of tax breaks for turning to alternative energy

Media release: The benefits of tax breaks for people turning to alternative energy in the spotlight at Premier Winde’s 13th Energy Digicon

Marle Van Niekerk, the Director of Personal Income Tax at the National Treasury, was Premier Alan Winde’s special guest at his 13th Energy Digicon this week. Ms Van Niekerk explained the tax incentives announced earlier in the year to encourage households and businesses to install solar photovoltaic (PV) systems and other renewable energy sources to lessen their dependence on Eskom and to ameliorate the impact of blackouts.

Ms Van Niekerk said, “We proposed these incentives because we need additional clean energy generation. The incentives are aimed at providing a benefit to taxpayers to go above and beyond what they ordinarily do. We call this a behavioural incentive. The reason why we provide the benefit is to derive a public benefit; this is energy.”

• Individuals can claim 25% in tax deductions on the cost of installing solar PV rooftop panels, with this capped at R15 000 for one year, effective from 1 March 2023. There is a special provision: If the panels are sold before 1 March 2025 the taxpayer will have to pay back the credit.
• Businesses can deduct 125% of the cost of assets that produce renewable energy. But if the assets are sold before 1 March 2026, 125% of the amount recovered or recouped will be included in taxpayers’ income.

The estimate for revenue forgone is estimated at this stage to be R4 billion for the current tax year. But Ms Van Niekerk still urged those who can, to claim the incentive. “If the take up is much higher than that, then the risk is on us essentially because that would mean more revenue foregone,” she said, adding, “but given where we are, I think additional generation capacity is very welcomed.”

With the onset of winter, mass power outages will worsen. South Africa is already stuck at intolerably high stages of power blackouts, with households and businesses bearing the brunt. Premier Winde said, “At the very least tax breaks are on offer to fed-up South Africans. This is a start but still not enough to mitigate blackouts.”

When the measure was first introduced, he cautiously welcomed the move, but called for:

• The tax break incentive for SMMEs to be increased from 125% to 140%.
• Allow households’ tax rebates on a wider basket of energy-producing and saving products, not just for solar. This would include LED bulbs, ripple control geysers, and LPG gas for stoves. Increase the tax break incentive for households from R15 000 to R40 000.

During the digicon Special Advisor on Energy to the Premier Alwie Lester gave an update on some short-and medium-term measure the Western Cape Government will be rolling out imminently. He said, “We are making steady progress with the Western Cape Energy Resilience Programme. The loadshedding emergency packs have gone to market and in the next few weeks, we will be able to announce which towns in the province will be able to become loadshedding-free.”

Mr Lester also explained the week’s energy availability factor for the country has improved increasing to 56%. “This is the second highest we have seen over the past 12 months due in part to the number of unplanned outages that have been lower this week. But the reserve margin is still below what is required in the power system,” he stressed.

To watch a recording of this week’s digicon visit:
https://www.youtube.com/watch?v=B9Yo4GCzQrU