Will tax gobble up the solar feed-in tariff? (Part 1)
Posted by John, August 31st, 2009 - under Constitution, Excise, Feed-in-tariff, Income tax, PVCs, Photovoltaic cells, Solar energy, capital gains tax.
My Dad has solar photovoltaic cells (PVCs) on his roof.
He paid big bucks for these PVCs and got a generous rebate for doing so.
The NSW Government will pay him over the odds for any energy net of his own consumption he supplies to the grid.
I paid his electricity bill the other day and there was an amount of credit for sun power.
That got me thinking about income tax.
Is the payment the New South Wales Government makes to him for the solar energy he supplies to the grid assessable income and hence taxable?
I am writing this late at night and so these are just the tired thoughts of a former tax man, and I am not sure I understand how the scheme operates in practice, but at first blush I’d have to say the payment for solar energy generated could well be assessable income.
I did a quick google search to see what had been written about it.
Not much, and it appears to me to be wrong anyway (including a Tax Office Interpretative Decision on the matter.)
This seems to me to be income from property and so is assessable unless excluded specifically from taxation.
Any costs, eg interest on loans to buy and install the PVCs, depreciation, repairs and so on, would be allowable as deductions.
And what about any rebates or grants? They too might be assessable income.
Certainly they would be if it were a business putting PVCs on their roofs, unless specifically excluded from the income tax base.
Are there any GST implications? Probably not for my Dad but for business maybe.
And more speculatively does this receipt of income impact on my Dad’s family home capital gains tax exemption? Oh dear. I will have to read the CGT family home provisions again.
And the other question that crops up which the constitutional experts can ponder – are these net and gross feed-in-tariffs actually excises under our Constitution and so only something the Commonwealth can impose?
In other words are the state and territory feed-in-tariffs unconstitutional?
Perhaps someone without the wherewithal to put PVCs on their roof (or a class action firm of lawyers) might one day think about challenging any increase in electricity charges they will have to pay to fund the increased payment to PVC owners for their solar generated electricity.
After a good night’s rest and a day of labour I hope to return to these questions in more detail with more definite views.
I might even discuss the policy vacuum the states seem to operate in, and the policy failure that a feed-in-tariff arguably is.
Just some first thoughts. Stay tuned for Part II.
This is not tax advice and is not intended to be tax advice. For any questions you may have please seek the advice of the ATO and/or an accountant.
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Comments
Comment from Arjay
Time September 1, 2009 at 10:56 pm
As we use less power,so in turn will it’s price go up.Individuals could be worse off.Your dad could also be caught out in earning an income via solar,since he then may also be liable for capital gains on his house.
Solar is new technology and is expensive to replace.I would wait till it gets better and cheaper even with a Govt subsidy.
Comment from Benjamin Solah
Time September 1, 2009 at 10:51 am
I’m pretty sure grants, such as those given to writers, are taxed.