Payments for electricity generated from solar panels

Will you be taxed for selling solar-panel generated electricity back to the grid?

More and more homeowners are installing solar panel systems in their homes.  In some cases, the solar panel system may produce more electricity than they consume.  If this is the case, the homeowner can often “sell” the excess electricity back to their electricity company, which will be released into the electricity grid.

This obviously begs the question: will the payments they receive from the electricity company be included in their assessable income?

The ATO has basically confirmed that, in typical situations where payments are received from electricity retailers by homeowners for the power generated by their solar panels that is exported to the grid, the payments would generally not be classed as assessable income, as they would be private or domestic in nature.  This conclusion takes into account the amount of equipment used to generate the electricity, the current pricing structure, and the fact the homeowner produces the electricity for a domestic purpose only.

In addition, since the payments are not assessable income and are private or domestic in nature, a homeowner in the above situation would not be able to claim a deduction for the costs associated with the solar system, such as interest and depreciation.

Note, however, that if the characteristics of the activity change (including the motivation for undertaking that activity, how the activity is undertaken and whether there is a real prospect of profit from the activity), the receipts or credits from the activity may become assessable income.

For more information

For more information regarding this article or its contents, please contact Alex Mineeff from Taxable Accounting on 02 8883 4016.

Alex Mineeff formed Taxable Accounting, to provide professional accounting, taxation, auditing services to individuals and small businesses. Alex is a Certified Practising Accountant (CPA), registered auditor, and is a member of a number of professional bodies, including Australian Society of CPA’s, National Taxation & Accountants Association, and the Taxpayers Association. Alex is also an active member of both the Rotary Club of Norwest Sunrise and the Hills Chamber of Commerce.

Alex Mineeff
Taxable Accounting
208A/Level 2
Skycity, 20 Lexington Drive
Bella Vista NSW (Norwest Business Park) 2153

Telephone: 02 8883 4016
Facsimile: 02 8824 5274