Edited version of your private ruling

Authorisation Number: 1012476566055

Ruling

Subject: Payments received from solar panels

Question 1

Are the credits or payments received from the solar panel generating system on your home assessable income?

Answer: No.

Question 2

Are you entitled to any deductions against the credits or payments received from your solar panel generating system?

Answer: Not applicable as income is not assessable.

This ruling applies for the following period

Year ended 30 June 2013

The scheme commenced on

1 July 2012

Relevant facts

You had a solar panel generating system installed on your principal residence.

You assigned the Renewable Energy Certificates back to the installer in return for a discount on the purchase price.

You had the panels fitted to reduce your personal electricity account.

You have received a cash refund.

Relevant legislative provisions

Income Tax Assessment Act 1997 Section 6-5

Income Tax Assessment Act 1997 Section 6-10

Reasons for decision

Subsection 6-5(2) of the Income Tax Assessment Act (ITAA 1997) provides that the assessable income of an Australian resident includes ordinary income derived directly or indirectly from all sources, whether in or out of Australia, during the income year.

Assessable income also includes statutory income under section 6-10 of the ITAA 1997. However, there are no specific legislative provisions relating to money or credits received from electricity suppliers. Therefore, such amounts are not statutory income.

Whether the payments received are assessable as ordinary income depends upon a close examination of all relevant circumstances.

Relevant factors in determining whether an amount is ordinary income include:

· whether the payment is the product of employment, services rendered, or any business

· the quality or character of the payment is in the hands of the recipient

· the form of the receipt, that is, whether it is received as a lump sum or periodically, and

· the motive of the person making the payment, but noting that this latter factor is rarely decisive, as a mix of motives may exist.

Amounts that are periodical, regular or recurrent, relied upon by the recipient for their regular expenditure and paid to them for that purpose may be ordinary income. However, receipts that indicate the arrangement is private or domestic in nature are not likely to be ordinary income.

In determining whether the receipts are assessable income, consideration needs to be given as to whether the receipts indicate an activity that is more than private or domestic in nature. The following factors are relevant:

· the size of the solar panel system

· the terms of the arrangement with the electricity retailer

· whether there is a realistic opportunity for you to profit from the arrangement, and

· the regularity of payments received such that they can be relied upon.

Under the scheme operating for your solar panel system, you received a credit of $518.19 when your electricity generation exceeded your household consumption.

Although you received a credit, based on your circumstances, it is considered that the credit is largely private and domestic in nature and not assessable income. This is based on the following:

· the scheme is connected with the electricity needs of your household and primarily satisfies the electricity consumption of the householder

· the size of the solar panel system is essentially designed principally for ordinary domestic needs

· the system is installed on your home

· payments/credits are received only after your personal consumption in your private residence has been accounted for

· the amount received is not considered to be substantial

· there is no realistic opportunity for you to profit greatly from the arrangement.

Please note, that as the system is regarded as private in nature and not used to produce assessable income, no deduction is allowed for the associated costs of the system.