More than one million households in Australia are generating electricity from solar photovoltaic panels installed on their homes and they receive a credit or payment, namely a return in some form for the electricity generated. The focus of this article is on domestic households and the returns they receive from solar panels installed on their roofs. This article contends that such returns in the form of a credit or actual payment to households for electricity generated from solar panels is ordinary income from property and should be treated as assessable income. Where the electricity generated is fed back into the household it will not be assessable income, but in all those cases where the electricity is fed into the grid and a payment or credit is given, then that return is income according to ordinary concepts and assessable as such. If the government wants to encourage investment in solar energy by householders in Australia then it should clarify this issue by passing legislation exempting the returns from assessable income. Alternatively the Australian Taxation Office (ATO) could release a public ruling on the issue. This at least would provide greater certainty for households who now tentatively rely on private rulings given to taxpayers by the ATO that consider credits and payments not to be assessable income on the basis that the householder is not conducting a business or that the arrangement is of a private or domestic nature.
|Number of pages||18|
|Journal||Australian Tax Review|
|Publication status||Published - 2014|