Private ruling: GST - supply of solar system and trading in small scale technology certificates
Date of advice: 2 February 2023
Published: 20 March 2023
Ruling period: 2/02/20XX to 01/02/20XX

Ruling: Q1: How do you calculate GST on your sale of an installed solar system where the amount you receive from a RECs trader, X for the assignment of the rights to create Small Scale Technology Certificates (STCs) is greater than the amount of the quoted 'up-front discount' relating to your sale of the installed solar system to a homeowner? | A1: Your GST liability on the sale of solar system is 1/11 th of the sum of the following payments: The payment you receive from X forms part of the total price for your sale of the installed solar system. The GST liability on this payment is 1/11 of the payment received from X. | Q2: How do you attribute GST on your sale of an installed solar system where the amount EES pays you for the assignment of STCs is greater than the amount of the quoted 'up-front discount' relating to the sale? | A2: You would report GST at 1/11 th of the sum of the following amounts in the BAS for the tax period in which you received any of these amounts or if you issued an invoice for any of these amounts in an earlier tax period - the BAS for that earlier tax period. You would report the GST on the amount X pays you in the BAS for the tax period in which you know that amount. The GST on that payment is 1/11 th of the payment amount. | Q3: Are you making a taxable supply to X under the specified circumstances? | A3: No.

Relevant facts and circumstances: You are registered for GST and account for GST on a non-cash basis. You are an 'approved solar retailer'. You are not a registered agent under the Small Scale Renewable Energy Scheme. Under the Small-scale Renewable Energy Scheme (SRES), eligible small-scale renewable energy systems are entitled to create a number of small-scale technology certificates (STCs). There is a market for STCs. STCs can be sold through a Clearing House. There are also entities that buy rights to create STCs. A STC is equal to 1 megawatt hour of renewable electricity either generated or displaced by eligible small-scale renewable energy systems such as solar PV, wind and hydro and solar water heaters and air source heat pumps. STCs create a financial incentive to install small-scale renewable energy systems by reducing upfront installation costs. The number of certificates that can be created per system is based on its geographical location, installation date, and the amount of electricity in megawatt hours (MWh) that is: You organise a solar job by providing a quote and signing the Sale and Installation Agreement with Homeowners. You purchase solar equipment, organise delivery, subcontract an electrician to install the solar system and connect the solar system to the grid. During the process, you deal with three types of financial incentives available to the homeowners - they are: If you instal a solar system, you receive the State or Territory government solar rebate money and the State or Territory government loan funds on behalf of the homeowner. When you install a solar system for a customer of yours (a homeowner), your customer (the homeowner) is entitled to create a number of STCs. You assign a value to these STCs and you deduct this amount from the amount that your customer (a homeowner) has to pay you directly. You refer to the value you initially assign to the STCs as an 'up-front discount'. The 'up front discount' is contingent on your customer (a homeowner) assigning their rights to create STCs to X and allowing for the proceeds from the sale of the rights be paid by X to you. You provided the following details of the trading process: • You create a solar installation job on the RECs trader online trade platform. When you create the new job you provide the job details which include the installation date and homeowner details. • Once the job is created, you can see the details on RECs trader online trade platform. • You add the capacity of the system and information of the equipment used. The STCs is calculated by the capacity of the solar system. • Once you have provided all the details of the job, you can send the job to an electrician. • The electrician adds their name and Accreditation number. The job is added to the electrician's schedule. • After installation, the electrician uploads all photos of the system installed. • An inspector will check the installation within 2 weeks. If the installation does not have a problem, the inspector will send to you a certificate of electrical safety. You upload this certificate on RECs trader online trade platform. • The homeowner assigns their right to create STCs to a REC trader - X • You receive payment from X for the STCs within 2 or 3 weeks. You provided a quote example to a homeowner with the following details: Item Price (inc. GST) Panels $X Inverter $X Racking $X Installation $X Other: Delivery $X System Price $X Less STC incentive (X*X) $X Total Price: $X State or Territory government home solar rebate -$X State or Territory government interest-free loan -$X Out of pocket up-front payment $X A $X deposit (inc. GST) is due on the date the Homeowner accepts your offer as set out in the quote. The balance (inc. GST) of $X is due on the date you deliver the System to the Homeowner's premises. Included with the quote is the Solar PV Sale and Installation Agreement Terms and Conditions which includes the following clauses: STC Incentive We have calculated the STC Incentive based on: (a) the maximum quantity of STCs that can be created in respect of the System under law, taking into account the Site-Specific Performance Estimate; and (b) the monetary value of that quantity of STCs, and deducted the STC Incentive from the System Price. (A reference to 'we' means you). Assignment of STCs • You hereby assign to us all of your existing and future rights, title and interest in and to all STCs created or able to be created in respect of the System. (A reference to 'us' means you). • You must do anything we reasonably request of you for the purpose of perfecting, confirming or evidencing this assignment, including providing information and executing documents. • You warrant to us, when you accept the offer set out in the Quote and again on installation of the System, that you have not previously created, or assigned the right to create, any STCs in respect of the System or any other solar photovoltaic generating unit at the Premises. • If you do anything that: (a) obstructs or avoids the assignment under clause X; (b) reduces the maximum quantity of STCs that can be created in respect of the System; or (c) renders the System ineligible for the creation of STCs, then we can increase the Total Price by the amount of the STC Incentive, and you must pay us the STC Incentive within X Business Days of us invoicing you for it. No guarantee of price the STCs are sold for You acknowledge that we have explained the process surrounding the payment and trade of STCs (i.e., that STCs are only sold through a Clearing House when there is a buyer, there is no guarantee on how long they will take to sell, and you are not guaranteed $X) You provided a copy of the X STC rights Assignment Form which includes the following details: • Solar Retailer • System Owner: Name and contact details of the Homeowner • Owner Mailing Address and the Installation Site Address • Installation & System Details • Installation Date: (date) • Site Property Type: Residential • STC Deeming Period: X years • STC Amount: X • SYSTEM OWNER/REPRESENTATIVE WRITTEN STATEMENTS o I am the legal owner of the above small generation unit (SGU) and assign the right to create STCs to X. o I have not previously assigned or created any STCs for this system within this period to claim X years deeming period for the SGU. STCs must be registered within X months of installation. o I understand I am under no obligation to assign STCs to X. o I understand that an agent of the Regulator or X may wish to inspect the SGU within X years of certificate redemption o I must retain receipts and proof of the installation date for the life of the STCs o I understand that this system is eligible for X STCs and in exchange for assigning my right to create these STCs, I will receive a point of sale discount from the solar retailer (you). o I am aware that penalties can be applied for providing misleading information in the form under the Renewable Energy (Electricity) Act 2000 You provided a copy of the RECs Trader Remittance Advice dated (date). It includes the following: Invoice date (date) X STC @ X Name of Homeowner and installation address Invoice Total: X Amount paid: X

Relevant legislative provisions: A New Tax System (Goods and Services Tax) Act 1999 section 9-5 | A New Tax System (Goods and Services Tax) Act 1999 section 9-10 | A New Tax System (Goods and Services Tax) Act 1999 section 9-15 | A New Tax System (Goods and Services Tax) Act 1999 section 9-70 | A New Tax System (Goods and Services Tax) Act 1999 section 9-75 | A New Tax System (Goods and Services Tax) Act 1999 subsection 29-5(1) | A New Tax System (Goods and Services Tax) Act 1999 paragraph 29-25(2)(e)

Reasons for decision: Summary: Your GST liability on the sale of an installed solar system is 1/11 th of the sum of the following payments: This is because all the amounts listed at the dot points above form part of the price for your sale of the installed solar system and your supply of the installed solar system is subject to GST | Detailed Reasoning - Detailed reasoning: GST is payable on taxable supplies. You make a taxable supply if you meet the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act), which states: You make a taxable supply if: (a) you make the supply for *consideration; and (b) the supply is made in the course or furtherance of an *enterprise that you *carry on; and (c) the supply is *connected with the indirect tax zone (Australia); and (d) you are *registered or required to be registered for GST. However, the supply is not a *taxable supply to the extent that it is *GST-free or *input taxed. (* Denotes a term defined in section 195-1 of the GST Act). In accordance with section 9-70 and subsection 9-75(1) of the GST Act, the GST payable on a supply is 1/11 of the price/consideration for the supply. Where the price/consideration is in the form of money, the GST is 1/11 th of that amount of money paid for the supply. We shall firstly consider what supplies are made under the arrangements in your case and secondly consider what payments are consideration for these supplies. This is because paragraph 9-5(a) of the GST Act requires that in order for a GST liability to arise under section 9-5 of the GST Act, there must be a supply for consideration and GST is worked out at 1/11 th of the consideration for a taxable supply. | Detailed Reasoning - Supplies made under the arrangements in your case: Subsection 9-10(1) of the GST Act states that a supply is any form of supply whatsoever. In accordance with paragraphs 9-10(2)(a) and 9-10(2)(b) of the GST Act, a supply includes a supply of goods and a supply of services respectively. In accordance with paragraph 9-10(2)(e) of the GST Act, a supply includes an assignment of a right. The ATO fact sheet, GST and the Small-scale Renewable Energy Scheme sets out a scenario involving a solar system installer, a purchaser of a solar system and a third party REC trader. The purchaser of the solar system assigns their rights to the third party REC trader. The example states: | Detailed Reasoning - Example: Assigning STCs to a REC agent who is not an installer: Peter, an installer of solar water heater systems who is registered for GST, sells a system to Jane for a GST-inclusive price of $4,400. Jane is not carrying on a business and is not registered or required to be registered for GST. Jane assigns her right to create the STCs in relation to the system to Sunxyz Pty Ltd, a REC agent. Jane is paid for this assignment in the form of an 'up-front discount' on the purchase and installation of the system. The 'up-front discount' of the system is $600, so Jane pays a net price of $3,800; that is, the GST-inclusive price of $4,400 less $600 'up-front discount'. The assignment of the right to create the STCs is a separate transaction between Jane and Sunxyz Pty Ltd. Sunxyz Pty Ltd pays Peter $600, being the amount equivalent to the 'up-front discount' on the system, received by Jane. Sunxyz Pty Ltd is registered for GST but cannot claim the GST credit in relation to the $600. This is because Jane is not carrying on a business and is not registered or required to be registered for GST. Peter's supply of the installed system to Jane has a GST-inclusive price of $4,400. Peter's GST liability is calculated before the reduction in price arising from the 'up-front discount' for the assignment of the right to create the STCs. Peter is liable to pay GST of $400. Peter does not have a GST liability in relation to the $600, as this is part of the $4,400. From the information you provided, two supplies can be identified in the arrangements in your case. The first supply is the supply of an installed solar system that you make to the homeowner. The second supply is the supply of the rights to create STCs by the homeowner to X, who is a third party (not the installer). In accordance with the fact sheet above, this is a transaction between the homeowner and X rather than a transaction between you and the homeowner. The transaction is a separate transaction to the transaction you and the homeowner enter into, being the sale of the solar system. The assignment documents consist of and are evidence of the supply of the rights to create STCs (Assignment Form) made by the homeowner to X. The homeowner makes a supply under paragraph 9-10(2)(e) of the GST Act as they are assigning their rights to X. | Detailed Reasoning - Identifying what payments are consideration for your supply of a solar system: Consideration is defined in section 9-15 of the GST Act to include any payment in connection with, in response to, or for the inducement of, the supply of anything. Under subsection 9-15(2) of the GST Act, it does not matter whether the payment, act or forbearance was voluntary, or whether it was by the recipient of the supply. Paragraph 180 of Goods and Services Tax Ruling GSTR 2006/9 discusses when a sufficient nexus exists, and it states: 180. In other GST rulings the Commissioner discusses the close coupling between supply and consideration in the GST Act. In determining whether a payment is consideration under section 9-15 and whether there is a 'supply for consideration' those rulings take the view that: • the test is whether there is a sufficient nexus between the supply and the payment made;this test is objective; • regard needs to be had to the true character of the transaction; and • an arrangement between parties will be characterised not merely by the description that the parties give to the arrangement, but by looking at all of the transactions entered into and the circumstances in which the transactions are made. | Detailed Reasoning - Payments paid directly by homeowner: The cash payments you receive directly from a homeowner have a sufficient nexus with your supply of a solar system. These payments are compensation for your supply of the solar system and they are something you receive for making the supply. Therefore, these payments are consideration for your supply of a solar system. | Detailed Reasoning - Payments paid by government: Paragraphs 182 and 183 of GSTR 2006/9 discuss third party payers. They state: 182. The objective test discussed in paragraph 180 of this Ruling may determine that a payment an entity makes is: • consideration for a supply made to the payer and the payer is the recipient of that supply; • not consideration for a supply; or • consideration for a supply but the paying entity is not the recipient of that supply. 183. If you provide or are liable to provide consideration for a supply, but you are not the recipient of the supply, you are referred to in this Ruling as a 'third party payer'. As a third party payer you do not make a creditable acquisition in relation to your payment because the supply is not made to you as required by section 11-5. Making a payment for a supply that is made to another entity is not sufficient to make you the recipient of that supply. The homeowners in your case are entitled to a government rebate and a loan from the government because the homeowners are having a solar system installed. The homeowner directs that this rebate and the loan funds be paid directly by the government to you. Therefore, these monies are paid to you by the government on behalf of the homeowner. These payments you receive have a sufficient nexus with your supply of a solar system. These payments are compensation for your supply of the solar system as they are things you receive for making the supply. Therefore, these payments you receive are further consideration for your supply of the installed solar system. | Detailed Reasoning - Cash payment you receive from X: You offer to give what you refer to as a 'discount' on the supply of the solar system on the condition that the homeowner assigns the rights to create STCs associated with the solar system to X and nominate you to be the recipient of the monies payable for the assignment of those rights. The expectation of the parties to the arrangement is that you will receive a payment from a party to whom the homeowner assigns the rights to create STCs. The following acknowledgment in your contract with your customer (a homeowner) provides some indication that your customer (a homeowner) is entitled to the proceeds from the sale of STC rights to X You acknowledge that we have explained the process surrounding the payment and trade of STCs (i.e., that STCs are only sold through a Clearing House when there is a buyer, there is no guarantee on how long they will take to sell, and you are not guaranteed $X) The owner makes a 'discounted' cash payment to you. If the homeowner did not agree to assign the rights to create STCs, you would not have offered the homeowner the 'discount' and the homeowner would be liable to pay an additional amount of money to you equal to the amount of the 'discount' you would have allowed had it agreed to assign those rights. The act of the assignment of rights by the homeowner ensures that the homeowner receives a 'discount' on the solar system as you will receive a payment at a later stage from the supply of the rights made by the homeowner to X. Under the arrangement that the homeowner has with the X, the homeowner has chosen you to receive any monies payable by X to the homeowner, in exchange for the point of sale 'discount'. The cash payment you receive from X has a sufficient nexus with your supply of a solar system. This payment is compensation for your supply of a solar system and it is something you receive for making the supply. Therefore, this payment is consideration for your supply of a solar system. X is a third party payer in relation to your supply of the solar system as it pays consideration for that supply as directed by the homeowner but it is not the recipient of that supply. | Detailed Reasoning - Conclusion: Your supply of the installed solar system is a taxable supply as the requirements of section 9-5 of the GST Act are met. Therefore, GST is payable on your supply of the installed solar system and the GST payable is 1/11 th of the sum of the amounts of consideration for that supply, that is, the following amounts: | Detailed Reasoning - Question 2: You are making a taxable supply of an installed solar system to the homeowner. The consideration for the supply of the solar system is the cash payment received directly from the homeowner; the cash payments received from the government and the cash payment received from X. In regards to attributing GST on taxable sales, the Commissioner can determine particular tax periods different to the tax periods that would otherwise apply under the basic or special rules. One such determination applies in circumstances where the total consideration is unknown in the tax period when GST would normally be payable. GSTR 2000/29 discusses this issue at paragraphs 92 to 94, which states in relation to taxpayers that account for GST on a non-cash basis | Detailed Reasoning - A supply or acquisition occurring before the supplier or recipient knows the total consideration (paragraph 29-25(2)(e)): 92. The particular attribution rule is for supplies and acquisitions where some consideration is received (or provided), or an invoice is issued, but the total consideration for the supply or acquisition has not been ascertained because it depends on a future event or events. The determination does not apply if that event is entirely within the control of the supplier. A copy of this determination is attached to this Ruling as Schedule 5 at page 65. 93. The effect of the particular attribution rule is to defer attribution of GST on the supply or entitlement to an input tax credit for the amount that cannot be ascertained. 94. The supplier attributes GST payable (or the recipient claims input tax credits) to the extent that consideration is received (or provided), or an invoice is issued. At the time the supplier (or recipient) knows the total consideration, GST payable on the taxable supply (or input tax credit for the creditable acquisition) is attributable to the tax period in which the supplier (or recipient) first knows the total consideration, but only to the extent that the GST (or input tax credit) has not been previously attributed to an earlier tax period. In your case, at the time of the supply of the solar system the total consideration is not known as it depends on some future event, being the creation and sale of the STCs and the fact that the sale price of the STCs may fluctuate. Additionally, you account for GST on a non-cash basis. Therefore, the Determination applies to you and you would attribute the GST payable on the supply of the solar system in accordance with the attribution rule in the Determination. You would report GST at 1/11 th of the sum of the following amounts in the BAS for the tax period in which you received any of these amounts or if you issued an invoice for any of these amounts in an earlier tax period - the BAS for that earlier tax period. (In accordance with subsection 29-5(1) of the GST Act). When the total consideration is known, you would attribute the GST payable on the sale of a solar system but only to the extent that the GST has not been already attributed to an earlier tax period. Therefore, the GST payable on the amount you receive from X is attributable to the tax period in which you know what the amount is going to be. | Detailed Reasoning - Question 3: As explained in question 1, there are two supplies identified in the arrangements in your case. The first supply is the supply of an installed solar system that you make to the homeowner. The second supply is the supply of the rights to create STCs by the homeowner to the RECs trader (X), who is a third party (not the installer). The payment you receive from X under the specific circumstances is not consideration for any supply that you make to X. It is a payment that is made by X on behalf of the homeowner which forms part of the consideration for your supply of an installed solar system to the homeowner. You are not making a taxable supply to X under the specified circumstances as you are not making a supply to them for consideration.

The payments that your customer (the homeowner) makes directly to you. | The payments you receive from the government in connection with a solar installation. | The payment you receive from X in response to your customer's (the homeowner's) assignment of STC rights to X. | generated by the small-scale solar panel, wind or hydro system over one or 5 years, or a single maximum deeming period, or | displaced by the solar water heater or heat pump over a single maximum deeming period. | the State or Territory government solar rebate; and | a State or Territory government loan; and | and the payment you receive from X in response to the homeowner's assignment of STC rights to X. | the payments you receive from the government in connection with a solar installation; and