Residential Solar Power: Is The Income Taxable?
There has been a bit of a storm in a teacup lately in the Australian press, claiming that all those people who “bought into the hype” and installed solar panels on their homes will now have to pay tax on the income they receive for any electricity generated.
Of course it’s very easy for the media to scare people and stir up reactionary outrage, but then when the situation turns out to be a little different, the reporters move on to the next football scandal and never bother to clarify the facts for their audience. People are left with the wrong idea, and the misinformation becomes “general knowledge”.
Even the article cited above contains a statement from the ATO that “Generally, no it’s not taxable – if you’re not carrying on a business.” But they don’t make that clear in the article, and still choose to run with the headline “Going solar has a few hidden extras”. Many news reports didn’t even bother to seek clarification from the ATO.
So, is solar power income taxable?As the ATO spokesperson said, and as has been reported on numerous industry web sites, the income derived from a small solar system installed on an owner-occupied residential dwelling is generally not taxable. I have to cover myself, though, and state that this is not tax advice and you need to obtain your own advice based on your unique situation from your accountant or tax agent.
It sounds like people installing large systems with the intention of making money will be required to pay tax on the income, though. This also means they’ll be able to claim depreciation on the asset and the costs of maintaining their system, just like any other income-producing asset. With rising electricity prices and falling solar panel prices, these systems can be a good investment.
One interesting aspect of the income from solar power systems is that it is counted as income for social security purposes (see section titled “Feed in tariff income and social security”). This may impact pensions and other payments, so if you think you may be affected you should ring Centrelink and ask about it.
Share your solar power stories!Do you have solar panels on your home? Or business? Are you grid-connected or standalone? What has been your experience so far? Are you having any hassles with utilities in getting your credits/payments?
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