Private ruling: Solar panels
Published: August 2012
Ruling period: Year ended 30 June 2011 | Year ended 30 June 2012
Date scheme commenced: 1 July 2010

Ruling: Q1: Will the payments you receive from the electricity company be included in your assessable income? | A1: No.

Relevant facts and circumstances: You installed a solar system on your residence. The home is your private residence and is not used for income producing purposes. The arrangement is a net scheme, with the electricity you consume being offset against the electricity which you generate. The system is currently generating more power than you consume. You have received several payments from the electricity company.

Relevant legislative provisions: Income Tax Assessment Act 1997 section 6-5 and | Income Tax Assessment Act 1997 section 6-10.

Reasons for decision: Summary: Sections 6-5 and 6-10 of the Income Tax Assessment Act 1997 provide that the assessable income of a resident taxpayer includes ordinary income and statutory income derived directly or indirectly from all sources during the income year. Generally, if an amount received is not considered ordinary income or statutory income, it is not included in assessable income. Whether a receipt or a credit is income according to ordinary concepts is determined based on a number of factors. These factors include the motivation for undertaking that activity, how the activity is undertaken and whether there is a real prospect of profit from the activity. If the characteristics of the activity change, the receipts or credits from the activity may become or cease to be income according to ordinary concepts as a result of those changes. You have installed solar panels to generate electricity and have received payments from the electricity company for the electricity you export to the grid. Taking into account the amount of equipment used to generate the electricity and the current pricing structure, we do not consider that the purchase of the system is primarily an income earning activity. You produce the electricity for a domestic purpose only. The payment that you will receive from the electricity generation would not be classed as income according to ordinary concepts under your present arrangement. There are no specific legislative provisions relating to payments received from electricity supplies, therefore it is not statutory income. Any income you receive from the electricity retailer for the power generated by your solar panels and exported to the grid are not considered ordinary income or statutory income and are therefore not included in your assessable income.

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.