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Terms we use
When we say:
- GST, we mean goods and services tax
- GST credits, we mean the GST term input tax credits
- purchases, we mean the GST term acquisitions
- sale, we mean the GST term supply
- payment received or made, we mean the GST term consideration.
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On 1 January 2011, the Renewable Energy Target (RET) scheme was divided into two parts:
- the Large-scale Renewable Energy Target for accredited power stations
- the Small-scale Renewable Energy scheme for the installation of solar water heaters and small generation units.
The Small-scale Renewable Energy scheme is to help with the upfront cost of purchasing eligible solar water heaters and small generation units (for example, photovoltaic systems) through supplying a right to create small-scale technology certificates (STCs).
Owners of installed eligible solar water heaters and small generation units can either:
- assign their right to create STCs to you (if you are a RET registered agent) in exchange for either
- a delayed cash payment
- an 'upfront discount' on the purchase of the eligible system
- become registered in the online clearing house and create STCs (once registered, these STCs can then be sold and transferred to a RET registered agent at any time during the life of the scheme).
A sale for GST purposes includes an assignment of a right.
Where the owner assigns you the right to create the STC on the installation of an eligible system, this is a sale for GST purposes.
However, if the assignment of the right to create a STC is made by someone who is not registered or required to be registered for GST, then the assignment will not be subject to GST.
Example 1 - Assignment of the right to create STCs
- registered or required to be registered for GST
- carrying on an enterprise.
The retailer has given him a discount on the purchase price of the system for the assignment of the STC that he is entitled to create.
John Little has no GST consequences when he assigns the right to create the STC. Therefore, the retailer is not entitled to claim GST credits on the purchase of the right to create the STC as the retailer has not made a creditable purchase.
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The retailer's sale of the solar water heater is subject to GST.
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STCs are created for the renewable energy production of installed eligible solar water heaters and small generation units. There is nothing supplied from the regulator to create the STCs. They merely record each STC created in the clearing house.
Therefore, for GST purposes there is no sale of the STC from the regulator to you so GST is not payable on the creation of a STC.
Transfer or sale of a STC
Once STC have been created they can be traded through the clearing house. A supply is any form of sale or transfer. Therefore, if an STC is transferred for a payment and the other requirements of a taxable supply are satisfied, the person supplying the STC will have a GST liability on the sale or transfer.
If the entity transferring or selling the STCs is not registered or required to be registered for GST, there will be no GST payable on this transaction.
Offsetting
For GST purposes, the GST consequences of each transaction have to be accounted for separately. There is no provision to 'net off' sales and apply GST to the net figure.
It is understood that price offsetting commonly occurs for the purchase of eligible solar water heaters and small generation units where the customer chooses to assign their rights to create a STC to another entity. The payment received for the sale of the assignment of the rights is then applied to reduce the amount paid by the customer to the seller of the eligible system for the purchase of the system.
Example 2 - Separate transactions
A retailer of a solar water heater sells an eligible system to a customer for a GST inclusive price of $4,400. The customer signs an agreement to assign their right to create STCs in relation to the solar water heater to the retailer, who is a RET registered agent. In return for the assignment, the retailer makes a payment to the customer. However, rather than the payment being made directly to the customer, the retailer of the solar water heater applies this payment as a reduction in the price of the solar water heater.
The retailer offers a reduction in the price of the solar water heater (commonly referred to as a credit, discount or rebate) of say, $600, to a customer which represents the payment made for the assignment of the customer's right to create STCs to the retailer. The customer will pay the retailer a net price of $3,800.
There are two supplies happening here which need to be examined and accounted for separately for GST purposes.
The first supply is the supply of the installed solar water heater to the customer for the GST inclusive price of $4,400. The retailer is liable to remit GST of one-eleventh of the price of this supply. Note that this GST liability is calculated before the reduction in price arising from the application of the payment made for the assignment of the right to create the STC as it is a separate transaction.
The second supply is the supply by the customer of the assignment of the right to create STCs to the retailer, the consideration for which is $600 applied as a reduction in the price of the solar water heater to the customer.
Where the customer is not registered or required to be registered for GST, the supply is not subject to GST. Where, however, the customer is registered or required to be registered for GST, the supply is a taxable supply and the customer is liable to remit GST of one-eleventh of the price of this supply. The GST registered customer should provide a tax invoice to the retailer so they can claim the relevant GST credits.
It is therefore not possible to net off these supplies and apply GST to the net figure. Each transaction must be accounted for separately.
Electricity and Gas Industry Partnerships - issues register
Last Modified: Wednesday, 28 September 2011