Private ruling: Solar panel system
Published: July 2012
Ruling period: Year ended 30 June 2011 | 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 2010

Ruling: Q1: Are the payments you receive for selling excess electricity to the grid assessable income? | A1: Yes.

Relevant facts and circumstances: The company (you) own a block of company titled residential home units. You had a photo voltaic system installed for environmental factors and to save on electricity costs; it was not installed with the intention of making a commercial profit. The 2kW (12 panel) system was installed in 2010. You paid approximately $X for the photo voltaic system. Excess electricity generated by this system feeds into the electricity grid and you receive refunds on the excess. Incremental payments are made on a quarterly basis. The system offsets electricity from the common property only and not to the individual units. During the 2010-11 income year you received more than $Y in refunds.

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

Reasons for decision: Summary: 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. Ordinary income has generally been held to include three categories, namely, income from rendering personal services, income from property and income from carrying on a business. Other characteristics of income that have evolved from case law include receipts that: · are earned, · are expected, · are relied upon, and · have an element of periodicity, recurrence or regularity. The photo voltaic system is regarded as property. Therefore, the amounts received are from property. The payments are received quarterly and are expected. Although the system was not installed with the intention of making a commercial profit, the payments you have received show that the system generates considerably more power than you require and there is a realistic opportunity for you to profit from the arrangement. Having regard to all of the above, it is considered that the amounts received from the photo voltaic system are ordinary assessable income under section 6-5 of the ITAA 1997. As the company owns the common property, the income is assessable income for the company. Please note that the associated costs of the system such as depreciation and maintenance are allowable deductions.

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.