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.

What kind of expenses am I expected to incur when entering into a Retail Lease?

We get this question a lot and it’s a tough one to answer! Not because we can’t – it’s just difficult to answer such a general question. There is no hard and fast answer to this question as it will depend on a large number of factors. In addition to rent, there are all sorts of costs that you would have to incur when you enter into a Retail Lease. These are both ongoing or one-off. Generally however you would incur the following outgoings:

  • Rent
  • Water Rates
  • Local Council Rates
  • Land Tax
  • Electricity Rates
  • Local Council Parking Levies (if premises offer council parking)
  • Local Council Outdoor Seating License (if premises have outdoor seating)
  • Public Liability Insurance
  • Glass Replacement Insurance
  • Building Administrative and Maintenance Fees(if premises is part of strata)
  • Marketing Fees (if premises is part of a larger shopping complex)

Outgoings will change depending on:

  • Floor space
  • Location
  • Value of the premises
  • Equipment on the premises
  • What you are doing

The above is a non-exhaustive list of matters. As stated there is no hard and fast answer to “what is expected” and “how much” it is expected to cost as these matters will change depending on where you want to lease. This is a matter for homework and you’ll likely get these answers once you’ve properly investigated the location of where you want to lease. But this isn’t a chicken and egg dilemma – in NSW the Retail Leases Act says that the landlord of retail premises must issue a “disclosure statement” to all potential lessees that sets out what these costs are before the lessee enters into the lease agreement.

Retail Leases can be complex – if you are entering into one, give us a call and we’ll guide you through the process and assist you with your transaction.