Noel Whittaker
Noel Whittaker

Selling home solar to the grid

A major question for anybody installing solar panels should be how the Tax Office will treat householders who generate solar power and sell the excess back to the grid.

A recent private ruling an accountant friend received is worth thinking about . It assumes “you have a solar electric system on the roof of your principal residence… you are not registered for GST… and your purpose for installing the system was to offset the cost of your electricity and to contribute to greenhouse emission reductions”.

If you are seen to be carrying on a business the income will be taxable income but you will also be allowed to deduct expenses such as depreciation, and even interest on funds borrowed to install the equipment.

The private ruling I have states the taxpayer who applied for the ruling will not be carrying on a business, and consequently will not be entitled to any relevant deductions in respect of the equipment.

Factors taken into account include “the solar panel system will be attached to your home rather than located at a dedicated business facility… although large for a home system it is designed for domestic rather than commercial use… there is no prospect of profit in the short or medium term and the likelihood of profit in the long term is also questionable as it is dependant both on the length of time the panels will remain effective before requiring replacement”. They also point out that the moment you move house you will lose the benefit of the cheaper electricity.

Bear in mind that a private ruling is applicable only to the person who applies for it, but it does give a good indication of the way the ATO will treat the average householder. However, many acreage owners are now spending $100,000 or more on solar panels with the main intention of selling it at a profit. At some stage they may cross the line and find they are carrying on a business instead of pursuing a hobby. This is why it is imperative that anyone thinking of moving into solar energy on a larger scale seek their own private ruling.

Noel Whittaker is a director of Whittaker Macnaught Pty Ltd. His advice is general in nature and readers should seek their own professional advice before making any financial decisions. His email is noel.whittaker@whittakermacnaught.com.au.


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