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Ruling
Subject: GST and solar panels
Question:
Can the partnership claim a portion of the costs incurred to install solar panels ready for use in a business activity, as a capital expense?
Answer:
Yes.
This ruling applies for the following periods
Year ending 30 June 2013
Year ending 30 June 2014
Year ending 30 June 2015
The scheme commenced on
1 July 2012
Relevant facts
The partnership operates an X farm.
You have installed a YKw solar panel system on a shed, with the electricity generated being fed back into the grid in return for rebates.
Currently, % of your electricity usage is attributable to the operation of equipment and % is for domestic purposes.
You will allocate % of your credits/rebates to the equipment usage costs.
Relevant legislative provisions
Income Tax Assessment Act 1997 - Division 40
Income Tax Assessment Act 1997 - Section 40-25
Income Tax Assessment Act 1997 - Section 40-30
Reasons for decision
Generally speaking, the cost of a solar power generation system is those amounts which you are taken to have paid to hold the solar system, such as the purchase price and its associated installation and connection costs.
For assets that are capital in nature, such as a solar power generation system, you can claim deduction for the decline in value of the cost of the asset used in gaining your assessable income under Division 40 of the Income Tax Assessment Act 1997 (ITAA 1997).
Under Division 40 of the ITAA 1997, you can deduct an amount equal to the decline in value of a depreciating asset that you held for any time during the year. A depreciating asset is described as an asset that has a limited effective life and can reasonably be expected to decline in value over the time it is used. Where it is used in producing assessable income a solar system would fall into that category.
In your case, you have installed a solar panel system which is used to generate electricity which is then fed back into the grid in return for rebates. The rebates will be used to offset your electricity costs; % of which is attributable to the operation of equipment and % is for domestic purposes. Therefore, you are entitled to a deduction for the amount equal to the decline in value of the cost of the system, including associated installation and connection costs. You must apportion any deduction by the part of the asset's decline in value that is attributable to your personal use.