Private ruling: Amounts received from solar power generating system
Published: July 2012
Ruling period: Year ended 30 June 2012 | Year ended 30 June 2013 | Year ended 30 June 2014 | Year ended 30 June 2015 | Year ended 30 June 2016
Date scheme commenced: 1 July 2011

Ruling: Q1: Are the payments received from the solar power generating system on your home assessable income? | A1: No. | Q2: Are you entitled to a deduction for the costs associated with the solar system? | A2: No.

Relevant facts and circumstances: You have a solar power generating system installed on your home. Your home is jointly owned. You installed a 5kW system. Your intention is to generate enough power to cover your own cost and to generate a surplus of power to provide an income source. You receive payments for any surplus of power supplied to the grid. Payments are made on a quarterly basis. During the past financial year you received a few hundred dollars per quarter.

Relevant legislative provisions: Income Tax Assessment Act 1997 Section 6-5. | Income Tax Assessment Act 1997 Section 8-1.

Reasons for decision: Detailed Reasoning - Assessable income: Subsection 6-5(2) of the Income Tax Assessment Act 1997 (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 any employment, services rendered, or any business, · the quality or character of the payment 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 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. | Detailed Reasoning - Your situation: Under the scheme operating for your solar system, you receive payments when your electricity generation exceeds your household consumption. Although you are expecting to receive a payment each quarter, based on your circumstances, it is considered that the payments are 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 system is essentially designed principally for ordinary domestic needs. · The system is installed on your home. · Payments are received only after your personal consumption in your private residence has been accounted for. · The amounts received are not considered to be substantial. · There is no realistic opportunity for you to profit greatly from the arrangement. 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.

Please check this edited version to be sure that there are no details remaining that you think may allow you to be identified. If you have any concerns about this ruling you wish to discuss, you will find our contact details in the fact sheet.