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.

The Personal Properties Security Register and your business

We have previously written about the Personal Properties Securities Register (PPSR). The PPSR allows businesses to register security interests over personal property, giving them rights over the personal property in exchange for the security of payment or the performance of a particular obligation.

Personal property is property that is not land, buildings, or fixtures. Personal property can be items such as machinery, stock, shares, debts, or even rights under a contract.

As previously discussed in the past these security interests would have been registered on a number of separate registers, such as with ASIC (if the security interest was over shares), or with REVS (if the security interest was a motor vehicle). The PPSR now streamlines all of that into one central register.

The PPSR also allows businesses or individuals to check whether the personal property they are purchasing have a security interest over them. This can provide potential buyers with a way how to double check and make sure that when the transaction is completed, the purchaser will have full rights to own the personal property. If there is a security interest attached to the car, then the vendor may not actually have the right to sell the car – but in the worst case scenario, the owner of that security interest (for example, the finance company who loaned the money for the car) can repossess the car if the loan has not been paid.

Because there is now a central register noting down all security interests, as a small business it should be theoretically easier to offer your plant and equipment / machinery as security for a loan, as it is easier for the bank to check if the equipment or machinery is either owned by someone else, or if someone else has already lodged their security interest on the equipment.

If you are a small business who sells goods on credit, you should consider registering your security interest on the goods, so that if your debtor does not pay your outstanding amount, you may try to repossess the goods. If you rent or lease out machinery and equipment, it might also be a good idea to register your security interest on the machinery and equipment.

For a small fee, the PPSR can be searched for a fee via http://www.ppsr.gov.au. If you are a small business, you should consider incorporating the PPSR and its features into your business processes!