Federal budget 2012: The abandoned tax breaks for green buildings promised $1 billion for property developers and investors

The tax breaks for green buildings program was announced as part of the 2010 government election commitment.

After an initial delay on its intended implementation date, it was signalled that from July 1, 2012 that eligible businesses that invested in improving the energy efficiency of their existing buildings would be able to apply for a tax break. The decision will save more than $400 million over the next three years, and more over its eight years expected time frame.

No legislation was ever introduced. Earlier this month concern was expressed that the scheme would be postponed or dropped was expressed by David Parken, CEO of the Australian Institute of Architects.

“While we have good regulations for new buildings that improve energy efficiency and reduce carbon emissions, existing built stock is a sleeping giant and needs a total makeover.

“If industry concerns are realised in Tuesday night’s budget announcement, it will be extremely disappointing,” Parken said before the budget.

The Institute voiced its support for the program when it was announced as an election commitment of the Gillard Government in 2010 and industry members have gone to great lengths to work with the government in fine tuning the logistics of the program.

“This scheme goes a long way in securing a reduction in carbon emissions, but also has the potential to create thousands of much needed jobs in the building and construction industry.

“To delay or indeed drop the scheme would be counterproductive to Australia’s commitment to reducing greenhouse gas emissions and a blow to the green jobs sector,” Parken said.

Businesses that invest in eligible assets or capital works would have extra incentive to improve the energy efficiency of their existing buildings.

Under the program, businesses would be able to claim a one-off bonus tax deduction of up to 50 per cent of the cost of the eligible assets or capital works. The scheme was expected to commence from 1 July 2011, but was postponed following extensive industry consultation, with the Australian Government committing to a 1 July 2012 start date.

According to the chief executive of the Green Building Council of Australia (GBCA), Romilly Madew, scrapping the promised $1 billion Tax Breaks for Green Buildings program would prevent Australia from picking the‘lowest of the low hanging fruit’, says the nation’s leading green building organisation.

“Buildings represent the fastest, most cost-effective opportunity to reduce our greenhouse gas emissions. They are truly the lowest of the low-hanging fruit,” she says.

The $1 billion tax break would have covered specified expenditure, which is incurred as part of a qualifying retrofit of an existing office building, hotel or shopping centre.

The retrofit would have had to be assessed by an accredited National Australian Built Environment Rating System (NABERS) assessor before and after the project.

To be eligible for the tax break, the building would have had to achieve a significant improvement in energy efficiency.

The tax breaks for green buildings program would have complemented other Australian government programs such as the Commercial Buildings Disclosure program. Action to improve the energy performance of Australia’s building stock is an important factor achieving Australia’s emissions reduction objectives.

The government announced in April 2011 to conduct further consultations around the tax breaks for green buildings program.

The government will continue to consult widely to ensure the scheme provides the right incentives for building owners to implement energy efficient retrofits.

The Parliamentary Secretary for Climate Change and Energy Efficiency Mark Dreyfus had indicated that it was proposed to provide $1 billion in support to the property industry over 8 years to improve the energy efficiency of older, less-efficient buildings around the country.