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Ruling

Subject: Goods and services tax (GST) and solar power

Question 1:

If you purchased the solar system from a retailer/installer, would you be entitled to an input tax credit on this purchase?

Answer

Yes.

Question 2:

If you purchased the solar system from the house owner, would you be entitled to an input tax credit on this purchase?

Answer

No.

Question 3:

Would GST be payable on your assignment of the right to create STC to a solar system retailer/installer?

Answer

Yes.

Question 4:

Would you be entitled to an input tax credit if you leased roof space from the house owner?

Answer

No.

Question 5:

Would you be entitled to an input tax credit on your purchase of electricity from the electricity retailer?

Answer

Yes.

Question 6:

Would GST be payable on your sale of electricity to the electricity retailer in return for FIT?

Answer

Yes.

Question 7:

Would GST be payable on your sale of electricity to the trustees?

Answer

Yes.

Question 8:

If you sell the solar system to the house owner, would GST be payable on your sale of the solar system?

Answer

Yes.

Relevant facts and circumstances

You (the trustees of a complying superannuation fund) are registered for GST.

You have a certain number of trustees. They are certain individuals. One is a house owner (the house owner).

You are the trustees of a complying superannuation fund.

One of the trustees (the house owner) is not registered for GST and would not choose to register for GST if they were not required to be registered for GST.

The house owner does not carry on any enterprise.

The house owner owns a house located in Australia.

You need advice on the following possible scenarios.

You may purchase a solar system from a retailer/installer. The sale of the solar system from the retailer/installer to you would be subject to GST.

You would attach the solar system to the roof of the house owner's house. The purchase of the solar system would result in an entitlement to create STC and an entitlement to assign the right to create STC.

You would assign your rights to create STC to the solar retailer/installer.

The house owner may purchase a solar system from a retailer/installer and on-sell the solar system to you at fair market value once it is installed on the roof of her house. The house owner would not make a profit from this.

The house owner would lease roof space to you so that the solar system could remain on the roof. A draft lease agreement states that the rent would be a certain amount of money a year. You stated that the amounts payable by you to the house owner pursuant to the lease would not exceed a certain amount of money a year.

The trustees would be accountholders in their capacity of trustees for the superannuation fund for the household's electricity account with an electricity retailer.

You would purchase electricity for the household from the electricity retailer. The electricity retailer would issue you GST invoices for these supplies of electricity.

You would sell surplus electricity generated by the solar system that is not used by the household to an electricity retailer in return for Feed In Tariffs (FIT).

You would also sell electricity used in the household to the trustees in their individual capacities.

Removal of the solar system from the roof of the house would do only minor damage, which would only require inserting epoxy resin into small holes in the roof tiles to repair the damage.

The draft lease agreement specifies that if the house owner sells the house, they would be required to purchase the solar system from you at fair market value.

According to Australian Taxation Office research, to be entitled to create and assign STC, an entity must be the owner of the small generation unit at the time it is installed.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 subsection 7-1(1)

A New Tax System (Goods and Services Tax) Act 1999 section 9-5

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(a)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(b)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(c)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(1)(da)

A New Tax System (Goods and Services Tax) Act 1999 paragraph 9-20(2)(c)

A New Tax System (Goods and Services Tax) Act 1999 section 9-40

A New Tax System (Goods and Services Tax) Act 1999 section 11-5

A New Tax System (Goods and Services Tax) Act 1999 subsection 11-15(1)

A New Tax System (Goods and Services Tax) Act 1999 subsection 11-15(2)

A New Tax System (Goods and Services Tax) Act 1999 section 11-20

Reasons for decisions

Question 1:

Summary

You would be entitled to an input tax credit on your purchase of a solar system from a retailer/installer because:

· you would acquire the solar system for a creditable purpose

· the sale of the solar system would be a taxable supply

· you would provide consideration for the supply of the solar system to you, and

· you are registered for GST.

Detailed reasoning

You are entitled to input tax credits on your creditable acquisitions.

You make a creditable acquisition where you satisfy the requirements of section 11-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states:

You make a creditable acquisition if:

· you acquire anything solely or partly for a *creditable purpose; and

· the supply of the thing to you is a *taxable supply; and

· you provide, or are liable to provide, *consideration for the supply; and

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

(*Denotes a term defined in section 195-1 of the GST Act)

Subsection 11-15(1) of the GST Act states:

You acquire a thing for a creditable purpose to the extent that you acquire it

in carrying on your *enterprise.

Subsection 11-15(2) of the GST Act states:

However, you do not acquire the thing for a creditable purpose to the extent

that:

· the acquisition relates to making supplies that would be *input taxed;

· or

· the acquisition is of a private or domestic nature.

In accordance with paragraph 9-20(1)(da) of the GST Act, the activities of the trustee of a complying superannuation fund are an enterprise. You are the trustees of a complying superannuation fund. Therefore, your activities are an enterprise.

Hence, you would acquire the solar system in carrying on your enterprise. Your acquisition of the solar system would not relate to making supplies that would be input taxed. Your acquisition of the solar system would not be of a private or domestic nature. Hence, you would acquire the solar system for a creditable purpose. Therefore, the requirement of paragraph 11-5(a) of the GST Act would be satisfied.

The sale of the solar system from a retailer/installer to you would be a taxable supply. Therefore, the requirement of paragraph 11-5(b) of the GST Act would be satisfied.

You would provide consideration for the supply of the solar system. Therefore, the requirement of paragraph 11-5(c) of the GST Act would be satisfied.

You are registered for GST. Therefore, the requirement of paragraph 11-5(d) of the GST Act would be satisfied.

As all of the requirements of section 11-5 of the GST Act would be satisfied if you purchased a solar system from the retailer/installer, you would make a creditable acquisition. Therefore, you would be entitled to an input tax credit on your purchase of the solar system from a retailer/installer.

Question 2:

GST is payable by you where you make a taxable supply.

You make a taxable supply where you satisfy the requirements of section 9-5 of the GST Act, which states:

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.

A one-off or isolated commercial transaction is an adventure or concern in the nature of trade, which is an enterprise under paragraph 9-20(1)(b) of the GST Act. However, an activity carried on by an individual without a reasonable expectation of profit or gain is excluded from the definition of enterprise (in accordance with paragraph 9-20(2)(c) of the GST Act).

You advised that the house owner does not carry on an enterprise.

The house owner's sale of a solar system to you would not have a commercial flavour as there would not be a reasonable expectation of making a profit or gain from selling a solar system to you. Hence, the sale would not be an adventure or concern in the nature of trade.

Furthermore, the exclusion from the definition of enterprise in paragraph 9-20(2)(c) of the GST Act would apply because the house owner would not have a reasonable expectation of making a profit or gain from selling a solar system to you.

The house owner's sale of the solar system to you would not be a supply made in the course or furtherance of an enterprise carried on by the house owner. Therefore, the requirement of paragraph 9-5(b) of the GST Act would not be satisfied. Hence, the house owner's sale of the solar system to you would not be a taxable supply as the requirements of section 9-5 of the GST Act would not be satisfied. Therefore, you would not satisfy the requirement of paragraph 11-5(b) of the GST Act. Hence, you would not make a creditable acquisition as you would not satisfy all of the requirements of section 11-5 of the GST Act. Therefore, you would not be entitled to an input tax credit on your purchase of the solar system from the house owner.

Question 3:

Where an entity purchases a solar system, which is eligible for STC and the entity assigns its rights to create the STC to the solar system retailer, this assignment of rights is a supply for GST purposes.

Where a solar system retailer offers a 'discount' on the price of a solar system to a customer in return for the customer assigning its right to create STC to the retailer, the consideration for the supply of the right is applied as a reduction in the cash amount payable by the customer for the purchase of the solar system.

Your assignment of a right to create STC would satisfy the requirements of section 9-5 of the GST Act. This is because:

· You would supply the right for consideration (the consideration is applied as a reduction in the cash amount payable by you for your purchase of the solar system).

· You would supply the right in the course or furtherance of an enterprise that you carry on.

· The supply would be connected with Australia.

· You are registered for GST.

· The supply would not be GST-free or input taxed.

Question 4:

Section 23-5 of the GST Act sets out the requirements for being required to be registered for GST. It provides that an entity is required to be registered for GST if:

(a) the entity is carrying on an enterprise, and

the entity's GST turnover meets the registration turnover threshold of $75,000.

Leasing out property on a regular or continuous basis is listed as a type of enterprise in paragraph 9-20(1)(c) of the GST Act.

The house owner would be leasing out property on a regular or continuous basis if she leased out roof space to you. Therefore, she would be carrying on an enterprise under that scenario. Hence, the requirement of paragraph 23-5(a) of the GST Act would be satisfied.

The consideration the house owner would earn from leasing roof space to you would be under $75,000 a year. Therefore, the requirement of paragraph 23-5(b) of the GST Act would not be satisfied where she carries out this activity (based on the information provided).

As not all of the requirements of section 23-5 of the GST Act would be satisfied, the house owner would not be required to be registered for GST (based on the information provided).

Additionally, the house owner would not voluntarily register for GST.

Therefore, the requirement of paragraph 9-5(d) of the GST Act would not be satisfied. Hence, the house owner would not make a taxable supply to you where they lease the roof space to you because the requirements of section 9-5 of the GST Act would not be satisfied. Therefore, you would not satisfy the requirement of paragraph 11-5(b) of the GST Act. As you would not satisfy all of the requirements of section 11-5 of the GST Act, you would not make a creditable acquisition. Hence, you would not be entitled to an input tax credit on your lease of the roof space from the house owner.

Question 5:

You would acquire the electricity in carrying on your enterprise. Your acquisition of the electricity would not relate to making supplies that would be input taxed. Your acquisition of the electricity would not be of a private or domestic nature. Hence, you would acquire the electricity for a creditable purpose. Therefore, the requirement of paragraph 11-5(a) of the GST Act would be satisfied.

It is presumed that the sale of the electricity from the electricity retailer to you would be a taxable supply. Therefore, the requirement of paragraph 11-5(b) of the GST Act would be satisfied.

You would provide consideration for the supply of the electricity. Therefore, the requirement of paragraph 11-5(c) of the GST Act would be satisfied.

You are registered for GST. Therefore, the requirement of paragraph 11-5(d) of the GST Act would be satisfied.

As all of the requirements of section 11-5 of the GST Act would be satisfied if you purchased electricity from an electricity retailer, you would make a creditable acquisition. Therefore, you would be entitled to an input tax credit on your purchase of the electricity.

Question 6:

A supply of solar generated electricity from a solar owner to an electricity retailer is a supply for GST purposes.

Your sale of electricity to the electricity retailer would satisfy the requirements of section 9-5 of the GST Act. This is because:

· You would supply the electricity for consideration (the FIT credit).

· You would supply the electricity in the course or furtherance of an enterprise that you carry on.

· The supply would be connected with Australia.

· You are registered for GST.

· The supply would not be GST-free or input taxed.

Hence, you would make a taxable supply of electricity to the electricity retailer. Therefore, GST would be payable on your supply of the electricity to the electricity retailer.

Question 7:

Your sale of electricity to the trustees would satisfy the requirements of section 9-5 of the GST Act. This is because:

· You would supply the electricity for consideration.

· You would supply the electricity in the course or furtherance of an enterprise that you carry on.

· The supply would be connected with Australia.

· You are registered for GST.

· The supply would not be GST-free or input taxed.

Hence, you would make a taxable supply of electricity to the trustees. Therefore, GST would be payable on your supply of the electricity to the trustees.

Question 8:

Your sale of the solar system to the house owner would satisfy the requirements of section 9-5 of the GST Act. This is because:

· You would supply the solar system for consideration.

· You would supply the solar system in the course or furtherance of an enterprise that you carry on.

· The supply would be connected with Australia.

· You are registered for GST.

· The supply would not be GST-free or input taxed.

Hence, you would make a taxable supply of the solar system to the house owner. Therefore,

GST would be payable on your sale of the solar system to the house owner.