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

    On 16 December 2019 the government announced in the Mid-Year Economic and Fiscal Outlook that it will amend the law to ensure that no tax is payable on the refund of large-scale generation certificate (LGC) shortfall charges. This measure will apply to refunds relating to all LGC shortfall charges including those charges already paid. This measure is estimated to have a cost to revenue of $70.0 million over the forward estimates period.

    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 shortfall charge. Liable entities which pay the shortfall charge may apply to have the shortfall charge refunded if they surrender the outstanding certificates within the allowable refund period.

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

    Administrative treatment

    You should self-assess under the existing law.

    If you choose to self-assess by anticipating the proposed law, it is not enacted and you understate your liability, you may be liable to GIC or SIC at the base interest rate.

    However, if the law is enacted and you overstate your liability, you would generally be entitled to a credit amendment and interest on overpayment.

    We will consider whether it would be an efficient, effective and ethical use of the ATO's limited resources to enforce compliance with the existing law where a taxpayer chooses to self-assess by anticipating an announced law change.

    We will take all reasonable action to prevent the payment of incorrect refunds where allowing taxpayers to anticipate the announced change would be likely, at least in some cases, to result in refunds and we could reasonably identify the affected taxpayers before the incorrect refunds were paid.

    More information on our administrative treatment of taxpayers affected by announced but unenacted legislative measures which will apply retrospectively when enacted, is available on ATOLaw.


    Legislation to give effect to this measure was introduced into the House of Representatives on 28 October 2020:

    More information

    Budget 2019–20 Mid-Year Economic and Fiscal OutlookExternal Link

    For any further enquiries:

      Last modified: 05 Nov 2020QC 61039