Edited version of your written advice

Authorisation Number 1051372901857

Date of advice: 11 May 2018

Ruling

Subject: GST and small-scale technology certificates

Question

Are payments you make to the Retailer for the amount equivalent to the value of the small-scale technology certificates (STCs) in relation to an assignment of rights to create STCs by an unregistered owner of the solar panel systems, subject to GST?

Answer

No, the payments you make to the Retailer for the amount equivalent to the value of the STCs in relation to an assignment of rights to create STCs by an unregistered owner is not subject to GST.

This ruling applies for the following period(s)

1 April 2018 to 30 June 2018

Relevant facts and circumstances

You are registered for GST.

You are a Renewable Energy Target (RET) registered agent, that is, you are authorised to buy and sell STCs.

Purchase of solar panel system

A customer who accepts a quote from a Retailer for the purchase of a solar panel system becomes the Owner of the solar panel system. The quote given to the customer includes a point of sale discount from the Retailer for an amount equivalent to the value of STCs assigned to you.

The customer or Owner is not registered for GST.

A copy of the quote from the Retailer to the Owner is provided for this purchase and includes the following information on the assignment of the right to create STCs to receive the point of sale discount.

The Retailer is also the installer of the solar panel systems or arranged for the installation of the solar panel systems.

When customers decide to proceed with the quote, they are given two (2) options of solar panel systems and payment terms. In both of the options, the value of the STCs is shown as discounted from the full price of the systems as “Government Subsidies – STCs”.

The quote shows the prices for the actual solar panel systems, the installation costs and warranty, the amount of the STCs as a government subsidy and a discount applied by the Retailer. You provided that you were not a party to the determination of the value of the STCs at the time of quotation. You mentioned that this is the unregistered price.

The customer will tick or choose one of the options and agree to the terms and conditions and other obligations, such as accepting additional charges, having additional roof tiles in case of having tiled roof tiles damaged and authorising the Retailer to act on the its behalf with Synergy to provide contact details directly to the installer.

The Retailer then invoices the customer. You provided us a copy of the tax invoice for the purchase of the solar panel systems as per quote above. The tax invoice shows that all the items provided to the customer have each a tax code of “GST” and the STCs item has a tax code of “FRE”.

The customer who now becomes the Owner of the solar panel systems signs a ‘Solar PV STC Assignment Form’. This form shows the owner’s details, the installation details including the solar panel serial numbers, the value of the STCs, the Installer and Electrician details and a mandatory declaration from the Owner which states that the Owner is the owner of the solar system mentioned in the STC Assignment form and the Owner agrees to assign its right to create STCs to you as the RET agent.

The Retailer then invoices you for the STCs.

You provided a copy of the tax invoice from the Retailer. The tax invoice shows that it is billed to you and shipped to the Owner. The tax invoice shows the quantity and value of the STCs as the same as the quantity and value as per the ‘Solar PV STC Assignment Form’ above. It shows the value of the STCs as the sale amount and balance due and 1/11^th of the value as GST.

You confirmed during our telephone conversation that the tax invoice does not relate to any solar panels owned by the Retailer and the Retailer has not assigned you any rights to create STCs in relation to this tax invoice.

You are asking for a private ruling on whether the invoice from the Retailer to you should include GST.

Relevant legislative provisions

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

Reasons for decision

Unless otherwise stated, all legislative references in this Ruling are to the A New Tax System (Goods and Services Tax) Act 1999.

From the facts provided, the payments you make to the Retailer for the amount equivalent to the value of the STCs in relation to an assignment of rights to create STCs by an unregistered owner of the solar panel systems to you is not subject to GST. This is because the supply to you is not a taxable supply under section 9-5 of the GST Act.

The Tax Office issued web guidance in relation to ‘GST and the Small-scale Renewable Energy Scheme’.

The web guidance provides the following relevant information on assigning the right to create STCs and on price offsetting:

Assigning the right to create STCs

If you assign the right to create the STCs on the installation of your eligible system, it is regarded as a sale for GST purposes.

If you are not registered or required to be registered for GST, then the assignment will not be subject to GST.

Where the assignment leads to price offsetting, the GST consequences of purchasing the system and of assigning the STCs need to be considered separately.

Example: Assigning the right to create STCs

John Little has installed an eligible solar water heater on his private residence. He is not:

● registered or required to be registered for GST

● carrying on an enterprise.

John assigns his entitlement to create STCs to the retailer for a discount on the purchase price of the system.

There are no GST consequences for John in making this assignment. Therefore, the retailer is not entitled to claim GST credits on the purchase of the right to create the STCs (that is, the discount).

Price offsetting

Price offsetting commonly occurs in the purchase of small-scale renewable energy systems. The customer chooses to assign their right to create STCs to another entity in return for a reduction in the purchase price.

For GST purposes, the GST consequences of each transaction have to be accounted for separately. There is no provision to 'net off' sales and apply GST to the net figure.

Example: Separate GST calculations

A retailer of a solar water heater, who is a RET-registered agent, sells an eligible system to Jane Little for a GST-inclusive price of $4,400. Jane signs an agreement assigning her right to create the STCs in relation to the solar water heater to the retailer. Rather than paying Jane directly, the retailer pays for this assignment in the form of a reduction in the price of the solar water heater.

The reduction in the price of the solar water heater (commonly referred to as a credit, discount or rebate) is $600, so Jane pays a net price of $3,800.

There are two transactions happening here which need to be accounted for separately for GST purposes.

The first transaction is the supply of the installed solar water heater to Jane for the GST-inclusive price of $4,400. The retailer must pay GST of one-eleventh of this price. Note that this GST liability is calculated before the reduction in price arising from the 'payment' (discount) for the assignment of the right to create STCs, because that is a separate transaction.

The second transaction is Jane's assignment of the right to create STCs to the retailer. She receives consideration of $600 for this assignment, applied as a reduction in the price she pays for the solar water heater.

Jane is not registered or required to be registered for GST, so this second transaction is not subject to GST. However, if the customer is registered or required to be registered for GST and the transaction is part of carrying on its business this transaction would come under the definition of a 'taxable supply' and the customer would have to pay GST of one-eleventh of the price of the assignment. The GST-registered customer should provide a tax invoice to the retailer so they can claim the relevant GST credits.

It is not possible to 'net off' these supplies and apply GST to the net figure. Each transaction must be accounted for separately.

Applying the web guidance to your particular case, when the Owner signed the ‘Solar PV STC Assignment Form’ this meant that the Owner assigned his or her rights to create the STCs in relation to the solar panel systems to you. By assigning the right to create the STCs to you, the Owner received ‘the point of sale discount for the value of the Small-scale Technology Certificates (STCs)’, as per its agreement with the Retailer when it accepts the quote.

For GST purposes, there are two (2) supplies arising from the purchase of the solar panel systems as described under the relevant facts and circumstances above.

Supply 1) Purchase of the solar panel systems

The Retailer supplies the solar panel systems to the Owner. The price will be subject to the normal GST rules and as the Retailer is registered for GST and the solar panel systems are not GST-free or input taxed then a supply of the solar panel systems will be a taxable supply and therefore GST will apply to the price of the solar systems.

The price that is subject to GST is the total price of the solar panel systems. As mentioned in the web guidance, price offsetting commonly occurs in the purchase of small-scale renewable energy systems when the Owner chooses to assign their right to create STCs to a registered agent in return for a reduction in the purchase price.

There is no provision to ‘net off’ the value of the STCs against the sale price, and then apply the GST only to the net figure, that is, the GST must be applied to the total price. Therefore, when the Retailer invoices the Owner for its taxable supply of solar panel systems, the GST should be calculated on the total price of the supply, before the value of the STCs are discounted (or netted off).

Supply 2) Assignment of the right to create STCs

To receive the point of sale discount equivalent to the value of the STCs, the Owner of the solar panel systems agrees to assign their right to create STCs to you.as the nominated agent. This assignment of right to create the STCs is a supply for GST purposes. This supply is from the Owner to you and not from the Retailer to you. It is the Owner of the solar panel systems who can assign the right to create STCs and not the Retailer. You also confirmed that the Retailer does not own the solar panel systems.

The payment you will be making is for the supply of the Owner’s assignment to you of the right to create STCs. In your case, as the Owner is not registered for GST, the payment for the assignment of the right is not subject to GST.

You provided a copy of the tax invoice issued from the Retailer to you, which you confirmed is issued to you by the Retailer in relation to the assignment of rights to create STCs. You confirmed that the Retailer does not own the solar panel systems. Consequently, the assignment of the right to create STCs is from the Owner and not from the Retailer.

As the supply is from the Owner who is not registered for GST, the payments for the transfer of the right to create STCs are not subject to GST because the supply to you is not a taxable supply under section 9-5 of the GST Act. It follows that no GST will apply to the payments.