Edited version of private ruling

Authorisation Number: 1011797049256

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Ruling

Subject: Income- other - solar

Question

Are payments you receive under the Household Renewable Energy Scheme assessable income under section 6-5 of the Income Tax Assessment Act 1997 (ITAA 1997)?

Answer: No

This ruling applies for the following periods:

1 July 2009 - 30 June 2010

1 July 2010 - 30 June 2011

1 July 2011 - 30 June 2012

The scheme commences on:

1 July 2009

Relevant facts and circumstances

You acquired and installed a photovoltaic solar system on the roof of your private residence.

You were eligible to receive a number of payments under a renewable energy scheme as a recoupment of expenditure on your system installation.

The amount paid depended on the systems size and the applicant's receipt of other government rebates.

You provided details of the amount and timing of each payment received under the scheme.

Relevant legislative provisions

Income Tax Assessment Act 1997 section 6-5

Income Tax Assessment Act 1997 subsection 6-5(2)

Income Tax Assessment Act 1997 section 15-10

Reasons for decision

The relevant legislation is the Income Tax Assessment Act 1997 (ITAA 1997). All references to legislation are to the ITAA 1997 unless otherwise stated.

Income, or more specifically assessable income, is divided into two categories:

· ordinary income (being income according to ordinary concepts); and

· statutory income (being amounts made assessable under specific provisions of the ITAA 1997 or the Income Tax Assessment Act 1936.

Subsection 6-5(2) provides that the assessable income of a resident taxpayer includes ordinary income derived directly or indirectly from all sources during the income year. In determining whether an amount is ordinary income, the courts have established the following principles:

· what receipts ought to be treated as income must be determined in accordance with ordinary concepts, except in so far as a statute dictates otherwise

· whether the payment received is income depends upon a close examination of all relevant circumstances; and

· whether the payment received is income is an objective test.

Taxation Determination TD 2006/31 discusses the taxation treatment of a government rebate for an energy saving appliance purchased by a property owner for use in their property. The government rebate is not income under ordinary concepts.

Section 15-10 is a specific provision within the income tax legislation regarding payments for government rebate that are a bounty or subsidy.

Where a government rebate is a bounty or subsidy and is not assessable as ordinary income under section 6-5, it is assessable under section 15-10 if the amount is received in relation to carrying on a business. Although the government rebate you received is a bounty or subsidy, it is not assessable under section 15-10 because it is not received in relation to carrying on a business.

In summary, as the rebate is neither assessable as ordinary or statutory income, the payments you receive under the scheme are not required to be included in your assessable income.