Solar Panels and Tax

I did a search of the ATO site and didn’t find anything on this.

I’ve heard that the income from solar panels should be included as taxable income in your tax return. Sounds likely. It would then also seem reasonable that you could claim a deduction for depreciation. Maybe also interest if you borrowed to fit them.

Do any accountants (or others) here know what the situation is?

This is from March 2010 and the answer then was NO. I don't believe it has changed since....

Tax implications of going Solar!

http://www.solarchoice.net.au/blog/tax-implications-of-going-solar.html

There's no issue in the context of a small residential system on your roof but I'm not sure about large commercial systems.

Basically, I think it's just another anti-solar scare tactic to be honest. Always plenty of them around - it will make your power bills go up, it will burn the house down, systems don't work, pay tax on the power produced, pay the power company for using your own power and so on.

All of those claims are absolute rubbish assuming we're talking about a decent installation, but they seem to have succeeded in keeping a great many people well away from solar power.

I'm very realistic about the limitations of distributed power generation, it is not a major alternative to fossil / nuclear / hydro, but that doesn't alter the fact that putting panels on your roof can actually be quite profitable depending on circumstances.

The ATO would be a big loser if the income (feed in tariffs) was taxable with resultant depreciation and finance interest deductability as the purchase value is the sum of what the resident paid plus the solar credits.

Some bean counter in the ATO may have realised this.

Smurf1976 said:

it is not a major alternative to fossil / nuclear / hydro, but that doesn't alter the fact that putting panels on your roof can actually be quite profitable depending on circumstances.

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It is a great investment. After six months of using power as we need it without trying to save on the cost we are almost $1200 dollars ahead and have free power on top of that. Our panels can generate up to 3.6kw. And that is after the cloudiest, wettest summer in many years. (and tax free too)

nioka said:

It is a great investment. After six months of using power as we need it without trying to save on the cost we are almost $1200 dollars ahead and have free power on top of that. Our panels can generate up to 3.6kw. And that is after the cloudiest, wettest summer in many years. (and tax free too)

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That's very impressive. Is the subsidised deal through which you did this still available? Can you tell us some of the detail of it?
After the subsidy, approx what was the cost: therefore how long until the system has paid for itself?

Do the solar panels necessarily need to be mounted on a north facing roof?
(I already have all my north facing roof covered with solar heating for the pool).

I've recently signed up for a 1.5kW system with install before the end of June. On the installer's figures an a simple assumption about what is used/feed back into the grid, annual return would be about 35% on the system purchase price. I'll be happy with 25% as that represents payback of intial capital over 4 years.

I have not done it out of concern for the environment, but rather for the return above and the expectation that electricity costs will continue to increase significantly. Partly for this reason also, I have purchased a solid fuel heater.

In terms of carbon (dioxide) abatement, I have seen a figure of $300 per tonne in relation to residential solar panels. That, if truen is much more expensive than a carbon price of, say, $25 per tonne.

For the government, taxpayers and installers, I wonder whether demand may necessitate an earlier withdrawal of government rebates due to the cost to the federal budget. If this is the case, the impact on installers could be adverse (like pink batts) resulting in long term warranties on components being worthless.

I suspect that like pink batts, this is another disaster in the making for the government. 5 years (possibly less) is all I need for a return better than bank interest (pre tax). Anything beyong that is, as far as I'm concerned, a bonus.

Julia said:

That's very impressive. Is the subsidised deal through which you did this still available? Can you tell us some of the detail of it?
After the subsidy, approx what was the cost: therefore how long until the system has paid for itself?

Do the solar panels necessarily need to be mounted on a north facing roof?
(I already have all my north facing roof covered with solar heating for the pool).

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Julia,

There is a lot of good stuff on the Whirlpool Forums about solar....

http://forums.whirlpool.net.au/forum/138

See if there is a forum listed specific to your location or at least to QLD. That will give you more precise info on the feed back tariffs applicable to your area.

I paid $9K for a 3.4 KW system. I don't know what the full price is, as the deal generally is the solar company takes the government discount and charges you the balance.

In WA, we get 47 cents for every net KW exported, net being the difference between what we produce and what we use calculated for each 30 min interval. I have mine installed only 2 months but I am expecting it to pay for itself in about 4 - 5 years.

North facing is the best, but east or west are also possible, but not as efficient.

Julia said:

Do the solar panels necessarily need to be mounted on a north facing roof?
(I already have all my north facing roof covered with solar heating for the pool).

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You'd be surprised how little difference it really makes having the panels face E or W depending on your roof pitch. In most cases, we're talking about a loss of less than 10% in total annual output assuming it's less than 90 degrees off true north. The exact losses will depend on roof pitch.

One thing however - NO shade at least during the majority of the day.

Regarding location, the critical factor is light not heat. They'll work better in Qld that's for sure, but output is still pretty decent in Vic or Tas as long as you're not at the bottom of a valley somewhere that gets no sun.

In terms of CO2 emissions savings, take it as being in the order of 2 tonnes per annum for a 1.5 kW system. That will vary with location, but it's of that magnitude. Bit more or bit less depending on where you live, which way the panels face and so on.

How much is the power output worth? Again that varies, but the worst case (Tasmania) is about $420 a year - lowest system output (due to weather) and relatively low price for the power too. The figure is higher in the other states - the exact amount varies but we're talking quite a lot more. It will depend partly on your power usage profile etc.

Bottom line? It's profitable to install a 1.5kW system in my opinion. A decent return, tax free, on a fairly conservative investment. Yes it's subsidised, but if someone's giving out money then I may as well have some.

I'm presently running a 1.36 kW system (originally installed as 1.02 kW under the old rebate system) and am giving some thought to expansion toward 3 kW. The deciding factor for that expansion will be financial (bearing in mind that there's not much in the way of subsidies for such an expansion).

With regard to specific equipment, my opinion is to steer well clear of Chinese inverters. Get a German, Japanese, USA or Australian made inverter from a decent manufacturer (personally I prefer the SMA products (made in Germany) since they're pretty much bullet proof in terms of reliability but there are other quality brands as well).

As for the panels themselves - your choice is either generic Chinese or a brand name that is probably made in the same factory or just down the road. Personally, I'd take the risk on cheaper panels but not a cheap inverter.

As for the actual installation - just a tip, get the inverter put under the house or somewhere else that's in the shade if at all possible.

Another one - make sure that installation of the import / export electricity meter is included in any price you are quoted. This will be done by the electricity distributor - costs vary between states (free in some states, not in others).

Maintenance? Not really necessary. Under normal circumstances you don't need to be cleaning the panels or anything like that unless you're living next to a factory with lots of fallout or get dust storms or something like that. Provided that they're on at least a 15 degree slope, normal rainfall will keep them clean.

Warnings? If you're in SA or Vic then just make sure you know what rates you will pay for electricity once the system is installed. Some of the suppliers there offer some rather nasty "deals" which you don't want.

What about solar hot water? My advice is that if you are going to install solar hot water as well as solar power then make sure the installer locates whichever you install first so as to leave space on the roof for the other. Don't put the first set right in the middle of the roof (many installers will do just that if you don't ask otherwise).

Specific comments for anyone in Tasmania for small systems under 3kW - meter install is free, no change to the rates you pay for electricity. Yes you still keep HydroHeat and/or off-peak meters and tariffs which are completely unaffected by installing solar (all solar output will be credited against your normal Light & Power use which is the highest rate). Only thing you can't have is Pay As You Go since the PAYG meters are not suitable for use with solar.

Smurf1976 said:

Bottom line? It's profitable to install a 1.5kW system in my opinion. A decent return, tax free, on a fairly conservative investment. Yes it's subsidised, but if someone's giving out money then I may as well have some.

I'm presently running a 1.36 kW system (originally installed as 1.02 kW under the old rebate system) and am giving some thought to expansion toward 3 kW. The deciding factor for that expansion will be financial (bearing in mind that there's not much in the way of subsidies for such an expansion).

With regard to specific equipment, my opinion is to steer well clear of Chinese inverters. Get a German, Japanese, USA or Australian made inverter from a decent manufacturer (personally I prefer the SMA products (made in Germany) since they're pretty much bullet proof in terms of reliability but there are other quality brands as well).

As for the panels themselves - your choice is either generic Chinese or a brand name that is probably made in the same factory or just down the road. Personally, I'd take the risk on cheaper panels but not a cheap inverter.

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This is the inverter to come with my system.

http://jtsolar.com.au/klne-sunteams-1500-high-efficiency-inverter.html

Chinese: Yes. Cheap: The above crowd have them listed for $1.4k. It does come with a 5-year warranty, so hopefully the installer in my case will last that long.

The following system has very similar characteristics to the one I have ordered in terms of location, pitch and direction.

http://pvoutput.org/list.jsp?p=0&id=202&sid=217&o=date&d=desc

He's averaged about 10kWh/day on sunny days since data commenced in mid Sept 2010. This is quiet similar to the sunny day numbers I have estimated for the corresponding time of year.

It may not be relevant for tax returns, but it does affect people who are receiving a pension. There is a flyer from Centrelink stating that -

• If you receive a rebate that exceeds the charge for power drawn from the grid, i.e. if your Power Utility sends you a cheque, you have to declare it as income for the billing period.
• If the credits are less, i.e. if you still have to pay something, there is no impact.

Sounds stupid, I know; but that's the kind of hare-brained idea they come up with.

bellenuit said:

There is a lot of good stuff on the Whirlpool Forums about solar....

http://forums.whirlpool.net.au/forum/138

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Yes anyone considering purchasing a solar system should look at this site.

I got my system through Origin because I was impressed with the quality of the panels and inverters their contract installers use.

After about 6 weeks my inverter (Sharp) displayed an error code. I went through the process of trying to reset (from the handbook and the help of the whirlpool site) to no avail. The inverter is guaranteed five years. It was replaced inside a week with no further problems.

There are quite a number of dodgy installers out there.(pink bats revisited.).Go with big companies.

pixel said:

It may not be relevant for tax returns, but it does affect people who are receiving a pension. There is a flyer from Centrelink stating that -

• If you receive a rebate that exceeds the charge for power drawn from the grid, i.e. if your Power Utility sends you a cheque, you have to declare it as income for the billing period.
• If the credits are less, i.e. if you still have to pay something, there is no impact.

Sounds stupid, I know; but that's the kind of hare-brained idea they come up with.

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More information;

http://www.centrelink.gov.au/internet/internet.nsf/payments/feed_in_tariffs.htm

On 14 May 2010 the Government announced that feed-in tariffs paid as an electricity account credit will not be assessed as income for pension purposes.

Feed-in tariffs paid as cash to pensioners (for example by cheque or by direct deposit) will continue to be counted as income for pension purposes.

This adjusted policy is also the approach adopted by the Department of Veterans' Affairs.

The adjusted policy applies from 14 May 2010 and applies to all Social Security income support payments (for example pensions such as Age Pension and allowances such as Newstart Allowance).

Each feed-in tariff paid as cash will be included under the income test for 12 months. For example if a pensioner received a cheque from their electricity company for $260 it will be counted as $10 income per fortnight for 26 fortnights.

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Synergy's (WA) default option is to credit excess credits to the homeoner's account (FAQ 8).

http://www.energy.wa.gov.au/3/3649/64/frequently_asked_questions.pm

Payments are made to the holder of the electricity account at the address where the system is installed. Payments are made as credit on the electricity account. If the account is more than $100 in credit arrangements can be made with Synergy or Horizon Power to receive the payment as a cheque.

Synergy will be introducing electronic funds transfer for its customers and this should be available shortly.

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Thanks for the advice, people. Bellenuit, that link and the embedded link to the ATO was just what I was looking for.

Its good news, although the stance from centrelink and veteran's affairs is a little disturbing. Hope the ATO doesn't decide to follow this.

Thanks to all who have offered such useful information.

Smurf, if my aim was to reduce the cost of running the heat pump for the pool (average three month cost in winter around $800) would I need to install a larger than usual system?

I've just spoken with a rep from Solarlife Pty Ltd who seems less than bright, and suggested I should remove the very efficient solar tubing which covers the north facing roof to heat the pool, to make way for the new solar panels!

Can anyone recommend a firm in SE Qld?

Julia said:

Thanks to all who have offered such useful information.
I've just spoken with a rep from Solarlife Pty Ltd who seems less than bright, and suggested I should remove the very efficient solar tubing which covers the north facing roof to heat the pool, to make way for the new solar panels!

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Lol! One of my relatives just had a similar experience.

He has a roof that is part slate, part aluminium sheet and asked for quotes to fit solar panels on the aluminium part. One rep suggested replacing the slate roof so that my relative could fit more solar panels!

Julia said:

Thanks to all who have offered such useful information.

Smurf, if my aim was to reduce the cost of running the heat pump for the pool (average three month cost in winter around $800) would I need to install a larger than usual system?

I've just spoken with a rep from Solarlife Pty Ltd who seems less than bright, and suggested I should remove the very efficient solar tubing which covers the north facing roof to heat the pool, to make way for the new solar panels!

Can anyone recommend a firm in SE Qld?

Click to expand...

I believe Solargain are a National outfit. If they're represented in your area, and assuming their service is consistent across the Nation, I would recommend you at least invite one of their advisors to come and have a look-see and chat.

Conceded they're not the cheapest, but their warranty is 25 years and their Suntek panels are rather efficient. We started with a 1KW system, but opted for the 2KW inverter. A couple of weeks ago, we added another 6 panels and regularly harvest between 10 and 12 units per day, even though our roof is not straight North-oriented.

PS: Remember to hose the panels down every couple of rainless weeks. Splashing the dust off the panels makes a helluva difference to the panels' efficiency.

PPS: Don't pick any of the el-cheapo's; friends wanted to "save" - now they find that a chimney casts a shadow on the panels, which reduces the efficiency drastically (there would've been space enough away from the chimney); and if they want to toggle through production figures on their inverter, they need a ladder. "D'oh!"

pixel said:

A couple of weeks ago, we added another 6 panels

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Pixel,

Does the government REBS rebate apply to extending an existing system?

I put in 3.4 KW of panels a few months ago, but attached them to a 4 KW inverter. I'm regretting now I didn't max out the inverter capacity. If I add more panels to fully utilise the inverter will the REBS discount apply?

bellenuit said:

Pixel,

Does the government REBS rebate apply to extending an existing system?

I put in 3.4 KW of panels a few months ago, but attached them to a 4 KW inverter. I'm regretting now I didn't max out the inverter capacity. If I add more panels to fully utilise the inverter will the REBS discount apply?

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Yes and No: the Government's subsidy is a fixed amount for the first installation only. We were lucky that we snuck in before the $8,000 were cut back to $6,000 in mid-2009. And luckier still when it came to our power company to charge us for the digital meter: initially, we had been quoted $695 (we needed a 3-phase one), but by the time they got around to billing us, that had come down to $290 as well

RECs can be used to lower the price each time you add more panels; we signed ours over to Solargain - didn't amount to a lot anyway.
The extension cost us about as much as the initial installation, but I had done the sums, and with the increased feed-in tariff, we'll have the entire system paid off in under 8 years. As power charges will only go up, that period is set to shrink even further.

pixel said:

RECs can be used to lower the price each time you add more panels; we signed ours over to Solargain - didn't amount to a lot anyway.
The extension cost us about as much as the initial installation, but I had done the sums, and with the increased feed-in tariff, we'll have the entire system paid off in under 8 years. As power charges will only go up, that period is set to shrink even further.

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Many thanks for your advice above, pixel.

When you say here that you will have the entire system paid off in under 8 years (which actually seems like a pretty long time to me) how does this work?
Is it dependent on the existing rules continuing to apply?
Is it conceivable that a change of government, or just a change of government policy, could scrap your capacity to get paid for the excess you generate?

sorry if these are dumb questions. I really have no idea how it all works.
Any enlightenment would be appreciated.