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  • Removing the tax on refunds of large-scale generation certificate shortfall charges

    On 13 September 2021 legislation removing tax on refunds of large-scale generation certificate shortfall charges (LGCs) received Royal Assent.

    Under the Renewable Energy (Electricity) Act 2000, liable entities (generally energy retailers) must surrender LGCs to meet their legal obligations or pay a non-deductible LGC shortfall charge. Liable entities which pay the shortfall charge may apply to have the LGC shortfall charge refunded if they surrender the outstanding certificates within the allowable refund period.

    The new law ensures that no tax is payable when companies receive a refund of their shortfall charge and will enable the market for renewable energy certificates to work as intended, meeting targets for clean energy while ensuring affordable electricity for consumers.

    LGC shortfall charge refunds are now categorised as non-assessable non-exempt income (NANE).

    If you receive a refund of the charge, you would record this amount in label 7 Q in your return for the year in which you receive the refund where the amount has been included in Item 6 T Total profit and loss. i.e the amount included at Q was income for accounting purposes, but not assessable for income tax purposes.

    Disregard the NANE status of the LGC shortfall charge refund for the purposes of determining whether an entity can deduct expenditure that it incurs in relation to LGCs that were acquired for the purpose of surrender to obtain the refund of the LGC shortfall change.

    This ensures that a deduction is available for LGCs acquired for the purpose of surrender for either a current or prior year liability under the Renewable Energy (Electricity) Act 2000 and applies to payments made and refunds received on or after 1 January 2019.

    Legislation

    The bill to give effect to this measure passed both houses of Parliament and received Royal Assent on 13 September 2021:

    More information

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      Last modified: 16 Sep 2021QC 61039