Solar-energy-savings-are-not-assessable-as-income-for-tax-purposes

Tax implications of going Solar!

by Solar Choice Staff on March 19, 2010

in Solar and Renewable Energy Policy

The Australian Tax Office [ATO] has released its findings regarding the treatment of income generated from selling electricity back to the grid.

In short, the finding was very favorable for projects installed on a principal residence as the credits or payments will not be classified as assessable income for tax purposes. This ruling makes going solar all the more attractive, especially for the larger 10kw investment style projects. Below are the three key rulings taken from the ATO website.

Ruling

1. Are the credits or payments you receive for power generated by solar panels on your residence, assessable for income tax?

Answer: No.

2. Are you entitled to either an outright deduction or a decline in value deduction for the cost of the solar panels?

Answer: No.

3. Are you entitled to any deductions in relation to funds borrowed in order to purchase the solar panels?

Answer: No.

Whilst you cannot depreciate the asset nor claim a tax deduction for the interest on any borrowed money, the solar installation will add value to your home and becomes a great selling point upon the resale of the property. This will become especially relevant if the government proceeds with attaching an energy rating to each residential home.

The link below refers to the ATO tax ruling regarding income from solar panels:

(Update 17 Oct 2011: The document originally linked to in this article is no longer available on the ATO website. Private rulings similar to the original can be found here and here.)

The above ruling will not apply for non-primary residences such as investment properties or businesses. Furthermore, if you are registered for GST purposes and make the installation with the intention of furthering business enterprise, then GST will be applied to any income generated. The link below refers to the ATO tax ruling regarding GST payable from solar income:

http://www.ato.gov.au/businesses/content.asp?doc=/content/41341.htm&pc=001/003/053/002/001&mnu=44301&mfp=001/003&st=&cy=1

Written by Adam Smith

Solar Energy Broker

Solar Choice

© 2010 Solar Choice Pty Ltd


{ 2 comments }

Jenny Tant October 14, 2011 at 10:56 am

Hello Adam,
The link provided to the ATO tax ruling regarding income from solar panels does not work. Please could you provide a correct link to the ATO ruling?
Thanks
Jenny

admin October 17, 2011 at 4:11 pm

Hi Jenny,

Thanks for pointing that out for us. It seems that the original document has been removed from the ATO website, so I have provided links to two ATO documents of a similar ilk on other websites. Please read at your discretion.

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