Tax Implications of Solar Power
Over the past few years, solar panels have amplified in popularity, bursting up on the roofs of houses and buildings all over Australia. One of the benefits of mounting solar panels being the income or credits you receive from the energy you generate and send back to the network.
This brings the question: is the income you receive assessable for tax purposes, and if so, are you entitled to deductions associated with the installation and ongoing maintenance of the panels?
The treatment of the solar panels may be summarised as follows:
- The payments you receive for the generation of electricity from the solar system are ordinary assessable income unless the income is considered to be private or domestic in nature.
- The costs you incur in relation to the generation of electricity are deductible to the extent that they are not capital or private and domestic in nature.
- You are able to claim deductions in respect of the decline in value of the capital cost of the system where the solar system is used to produce assessable income.
- The value of the right granted to you to create renewable energy certificates (RECs) is an assessable recoupment and must also be included in your assessable income.
- Any income generated from the solar system would be assessable to the individual owners.
So if you have solar panels on your main residence which are sufficient for your personal needs only, such income should not be assessable for tax purposes. This also means you would not be entitled to any deductions for depreciation of the solar panels.
In other circumstances, for example you are receiving income from the solar panels on your rental property; you have assigned the rights for receipt of income from your main residence to your installer; or you are in receipt of income from solar panels on a commercial building from which you run your business; the income should be assessable for tax purposes. The initial outlay would likely not be immediately deductible. However, the good news is that you should be able to claim deductions for the decline in value and ongoing maintenance costs of the solar panels.
So, the answer to the question: like anything relating to tax, it will ultimately depend on your individual circumstances. If you would like more information, book an appointment or give us a call.
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