Edited version of your private ruling

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Ruling

Subject: GST and solar electricity rebate

Question

Does your electricity retailer (retailer) have an obligation to pay you the goods and services tax (GST), when you supply solar generated electricity (solar electricity) to the electricity grid (grid) because you are registered for the GST?

Decision

Whether or not the electricity retailer pays you an additional amount to cover your GST liability, so that you get the full amount of the rebate mentioned in the contract after accounting for GST, is a pricing issue which needs to be determined according to the contractual arrangement between you and the retailer. Your GST liability is equal to one eleventh of whatever payment you received from your retailer. The A New Tax System (Goods and Services Tax) Act 1999 (GST Act) does not outline pricing or contractual issues.

Relevant facts and circumstances

You are registered for GST. You carry on an enterprise of farming. Recently, you installed a solar electricity generator (generator) in your property with a view to supplement your income from other activities, with the sale of solar electricity to the grid.

You entered into a contract with a retailer for the supply of electricity to your residence and purchase of your solar electricity. The retailer pays you a rebate at the rate of 55 cents per unit for solar electricity supplied to the grid.

You quoted your Australian Business Number (ABN) to the retailer.

You submitted an invoice from the retailer, which states that you received a solar rebate of 55 cents per unit of electricity supplied to the grid. The invoice does not include a separate amount to cover your GST liability.

State Solar Rebate Scheme

The State Government operates a Solar Rebate Scheme (scheme), through which they pay a rebate to eligible customers, who supply solar electricity to the grid. The scheme is implemented through a state government department (department). The actual payments are made to the eligible customers through the relevant electricity retailer.

The website of the department provides the following information about the scheme:

The scheme applies to customers (clients) who lodged an application to connect their renewable electricity generators to the grid by the cut off date;

Under the scheme, the department pays a rebate of 50 cents per unit of electricity supplied to the grid by eligible customers;

The scheme offers a 'gross' tariff, which means that clients are paid for all the electricity exported to the grid by their renewable energy generator;

All electricity retailers who supply electricity to small retail clients are required to participate in the scheme. Clients with annual electricity consumption of less than 100 megawatt hours are defined as small retail clients;

Clients should speak to their accountant or the Australian Taxation Office (ATO) for advice as to whether the payments under the scheme are taxable in their particular circumstances.

As per information provided by the department, they pay the solar electricity rebate to eligible customers at the rate of 50 cents per unit. This amount is actually paid to the relevant retailer, who in turn pays it to the relevant customer. Irrespective of whether the customer is registered for GST or not, they pay the same amount.

As per information provided by the retailer, they pay 55 cents per unit for solar electricity supplied to the grid by certain eligible customers. Out of that, 50 cents is contributed by the State Government. They pay 5 cents per unit to eligible customers as an incentive payment. They pay 55 cents per unit, irrespective of whether the customer is registered for GST or not. The customer should inquire from the ATO about their GST liability on the rebate received.

You provided links to the websites of a number of other retailers, who purchase solar electricity under different schemes and payment plans. You want us to consider whether these schemes and payment plans have any bearing on your GST liability.

Reasons for the decision

Section 9-40 of the GST Act provides that you must pay the GST payable on any taxable supply that you make.

Section 9-5 of the GST Act defines a taxable supply as follows.

You make a taxable supply if:

you make the supply for *consideration; and

the supply is made in the course or furtherance of an *enterprise that you *carry on; and

the supply is *connected with Australia; and

you are *registered, or *required to be registered.

However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed.

* denotes a term defined in section 195-1 of the GST Act.

Supply for consideration

According to subsection 9-10(1) of the GST Act, a supply is any form of supply whatsoever. According to how the electricity industry operates in Australia, the relevant electricity distributor owns the grid including meter boxes and supplies electricity to a customer's (e.g.; your) meter box. From the meter box to your residence, electricity is supplied by your retailer. We are of the view that the contract to supply electricity from the grid to you and to acquire solar electricity supplied by you to the grid is made between you and your retailer. Therefore, the supply of your solar electricity is made to the retailer. We consider that the consideration for this supply to be the rebate or bonus paid by the retailer.

Enterprise

According subparagraph 9-20(1)(b) of the GST Act, an activity done in the form of an adventure or concern in the nature of trade is considered to be an enterprise. You installed your solar electricity generator and supply the gross electricity generated to the grid, in order to supplement your income received from your other business activities. You receive a considerable amount of income by supplying electricity to the grid. When considering the manner in which you conduct these activities, we are of the view that you supply electricity to the grid, in the form of an enterprise.

Other requirements of section 9-5 of the GST Act

Your supply of solar electricity is connected with Australia as the solar generator is located in Australia.

Your are registered for GST.

The supply of solar electricity is not a GST-free or an input taxed supply under any provision of the GST Act.

Therefore, your supply of solar electricity satisfies all the requirements of section 9-5 of the GST Act as a taxable supply. Accordingly, you incur a GST liability on your supply of solar electricity to the grid.

Payments made for solar electricity

It is acknowledged that there is a large number of electricity retailers operating in different parts of Australia. There are different solar bonus or feed in tariff schemes operating in different states and territories of Australia. The retailers operate different payment plans and these plans keep changing. In issuing a private ruling to you, we cannot consider the different plans operated by different retailers. We will only consider the plan operated by your retailer.

Contract with your retailer

Your retailer has informed us that they pay at the rate of 55 cents per unit of solar electricity supplied by certain eligible customers. Out of this, 50 cents is contributed by the State Government under the solar rebate scheme. They contribute 5 cents per unit as an incentive payment. They pay 55 cents per unit irrespective of whether you are registered for GST or not. Therefore, when you entered into a contract with the retailer, you agreed to receive a fixed amount per unit, irrespective of whether you were registered for GST or not.

Your supply of solar electricity was a taxable supply. The consideration so far received is deemed to be inclusive of GST. Therefore, you incurred a GST liability equal to one eleventh of the consideration so far received.

If you would like to receive an additional amount of payment from your retailer to cover your GST liability, this should be negotiated between you and the retailer. As such, for your taxable supply of solar electricity to the grid, your GST liability is one eleventh of whatever the amount you receive from the retailer.