Solar and tax for business: depreciation, the $20,000 write-off and GST

Solar is a business asset, so its cost can reduce your taxable income over time. How fast depends on which rule applies. Here is what the ATO says, where it applies to solar, and the questions that will help you get the most from a conversation with your accountant.

What is the $20,000 instant asset write-off?

On 12 May 2026 the Government announced it would permanently increase the instant asset write-off for small businesses to $20,000 from 1 July 2026, and the ATO says this measure is now law (Treasury Laws Amendment (Tax Reform No. 2) Act 2026). From 1 July 2026, a small business with an aggregated turnover of less than $10 million can deduct the full cost of eligible depreciating assets costing less than $20,000 that are first used or installed ready for use in an income year.

The ATO also notes that the $20,000 limit is per asset, so a small business can instantly write off multiple assets. The lock-out rule for businesses that opt out of simplified depreciation remains suspended until 30 June 2027.

Does a commercial solar system fit under $20,000?

Sometimes, but not usually. Solar Choice’s September 2026 price survey puts the average installed price, after STCs and including GST, at about $10,110 for a 10 kW system, $28,350 for 30 kW and $48,160 for 50 kW. Solar Choice is a commercial comparison site, not a government source, and its prices exclude things like meter installation and grid connection studies. The figures show the pattern: a 10 kW system may come in under the limit, while 30 kW and above generally does not.

Could panels, inverter and battery be separate assets?

This is the question people hope will bring a bigger system under $20,000, and the honest answer is that we cannot tell you. Whether components are treated as one depreciating asset or several depends on how the tax rules view the system, not on how the installer’s quote lists the lines. Do not ask your installer to split an invoice to fit under the limit. Ask your accountant how they would treat your system first.

What happens if the system costs more than $20,000?

There are two common routes, and your accountant will tell you which one you are on.

• The small business pool: for eligible small businesses, assets of $20,000 or more can go into the simplified depreciation pool and be depreciated at 15% in the first income year and 30% each year after.
• General depreciation: the cost is deducted gradually over the asset’s effective life.

An illustration, not a calculation

Assume a $40,000 system, installed ready for use in 2026–27 and put into the pool, with nothing else in it. In the first income year the deduction would be about 15% of $40,000, which is $6,000. In the second year the pool rate is 30%, applied to what is left in the pool, and your accountant will work out the exact figures. The tax saving is your deduction multiplied by your tax rate, which is why it differs between businesses. A pool balance under $20,000 at the end of an income year can also be written off.

How long does solar last for tax purposes?

Depreciation uses an asset’s effective life. The ATO’s published effective life in Taxation Ruling TR 2022/1 for a solar power generating system, incorporating batteries, inverters, solar panels and regulators, is 20 years. That is the ATO’s published figure, not a guarantee of how long your system will last, and your accountant should confirm which determination and which life apply to your business.

Effective life matters if you use general depreciation or your business is not eligible for the small business rules. A longer life means smaller deductions each year, spread over more years.

What about GST?

We could not verify the ATO’s GST treatment of commercial solar or of the STC discount on an official page, so we are not going to state a rule. If you are registered for GST, ask your accountant about claiming GST credits on the system and how the STC discount appears on the tax invoice. Make sure the quote shows the GST amount separately and that the invoice is in the name of the entity that will claim.

What to ask your accountant

• Is my business a small business for the instant asset write-off, based on aggregated turnover?
• Will my system be one asset or several?
• Does the $20,000 test use the price with or without GST?
• Should I use the pool, or does another approach suit me better?
• Which entity should buy the system, and who should be named on the invoice?
• If I lease or finance the system, who claims the deduction?
• How does the STC discount affect the cost I claim?

The business.gov.au funding page notes that interest on debt finance is tax deductible, which can matter if you borrow. Our commercial solar finance guide covers loans, leases and hire purchase. Tax is only one part of the case, so also read is commercial solar worth it? and use the commercial solar calculator to estimate payback before tax. For incentives that lower the price first, see commercial solar rebates by state.

This guide is general information, not financial or legal advice. Rules, rebates and prices change, so check the linked sources before you decide. Facts checked 31 October 2026.