This is basically research assignment for Taxation law course. This Taxation Implications Assignment Help answers that what would be the taxation implications on the installation of solar power panels in Australia.
There are many types of taxes but in this report we will talk about the taxes imposed on solar energy panel, solar power means harnessing of sunlight to produce electricity, a modification of solar energy is known as solar photovoltaic (PV) that directly converts sunlight into electrical energy through solar panels (CANBERRA, High commisssion of india) and more individuals and businesses are installing solar power plant, we need to consider the taxation implications of both the installation costs of panels and the payments or offsets received for electricity fed back into an electricity grid also we need to see the general taxation principles help regarding the costs of their installation and the feed-in payments received in the private, business and dual-use.
Arising taxation issues
Now we have to see the taxes that are imposed on the solar panel that are installed for private use, business use and for dual use, the rebates that are available and the income from feed-in and the taxes on it. The Australian taxation laws are made in a way that encourages people in doing environment protective works and installing solar panel is one of its main sources.
Private solar panels
Since the last few years there has been an increase in the installation of solar panel by individuals on their rooftops and now more than a million properties in Australia have installed the solar system (MERCER, Phil, 2014). The Renewable Energy Target (RET) was designed so that it can ensure the Government’s commitment of ensuring that 20% of Australia’s electricity supply comes from renewable sources by the year 2020 (LIAM BYRNES, Colin Browna, john foster, liam wagner, 2013).
From 1 January 2011, the RET was divided into two divisions:
- The Small-scale Renewable Energy Scheme(SRES)
- The Large-scale Renewable Energy Target (LRET)(DANCASS.COM, (n.d.)).
The Small –scale Renewable Energy Scheme provides financial assistance for owners who wish to purchase small-scale solar photovoltaic panels (CLEAN ENERGY REGULAROR, 2013). Installation of these solar units permits the creation of small-scale technology certificates (STCs) which can be exchanged by owners for financial benefits. A STC is equal to 1 MWh of renewable electricity which is deemed to be generated by small scale units. The SRES also places a legal liability on electricity retailers to buy an amount of small scale technology certificates every year (BIOFUELS ASSOCIATION OF AUSTRALIA, 2013). The owners have two options for selling their STCs, it can be assigned to an agent like the system installer in lieu of a discount or delayed cash payment or they can sell the STC themselves in the open STC market or through STC clearing house which is fixed at $40 per STC (LIVING GREENER.GOV.AU, 2014).
FEED-IN TARIFF– it is the rate that is paid for extra energy produced by a solar panel that is exported back into the grid. Every state has different feed-in tariffs as there is no nationalised tax scheme yet. The tariffs are mostly for residential systems. There are two types of tariffs net feed in tariff and gross feed in tariff (CLEAN ENERGY COUNCIL, (n.d.)).
Net feed-in tariff– it is a premium that is paid for any solar energy that goes back into the grid and if all the energy is used that it will be offset against the electricity bill.
Gross feed-in tariff-In this one gets paid for every unit of electricity generated by the solar panels, not considering whether it goes back into the grid or it is used in the house (CLEAN ENERGY COUNCIL, (n.d.)). Incomes from Feed-in are not taxable unless it is more than $75,000.
Solar credits-Before the year 2013 a system was eligible for multiple solar credits, which could increase the number of STC a system could receive but on 16 November 2012 it was announced by the Australian government that the solar credits would be phased out for small scale systems that are installed from 1 January 2013 (ENERGY AUSTRALIA, (n.d.)).
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- Low electricity bill
- Rebates from government
- Income from feed-in tariff and it is not taxable till $ 75,000
- High capital costs of solar panels
- High maintenance costs of solar panel
- Installing solar panels on all types of roofs is not feasible
Business solar panels
The solar panels are also used on large scale for International business purposes by the people to save on electricity bills and the government is also supporting this by introducing new laws.
The Large Scale Renewable Energy Target (LRET)- It creates financial incentive for the establishment of large scale solar panel and this permits the creation of Large scale Generation Certificates(LGC) which can be sold or traded to entities. Also RET has made it a legal obligation for the entities to purchase LGC and surrender them to Clean Energy Regulator every year (CLEAN ENERGY REGULATOR, 2013).
- Section-40 of Income Tax Assessment act 1997 provides that, one can deduct an amount equal to the decline in value of a depreciating asset (it is an asset that is expected to decline or reduce in value over a time period) that one holds.
- Another section 40-G provides that one can deduct capital expenditure (which is the money spent on fixed assets.) on electricity over 10 income years(INCOME TAX, (n.d.)).
- Installation cost deductions– Business owner can deduct the cost they incurred for the generation of the electricity which includes solar panel and installation costs up to $6,500.
- Also deductions can be claimed on the basis of decline in the value of capital cost of the system in respect to the assessable income(INCOME TAX, (n.d.)).
- SOLAR CREDIT DISCOUNT-When businessman installs a grid connect solar system they can get tax break of $6,500 if their turnover is less than $2 million.
CAPITAL GAINS TAX
Capital gains tax will not be due on any gain or loss generated by taking advantage of a state federal renewable resources like RET scheme for the financial year 2007-08 and after that (TALBERG, Anita, 2012).
- Saves a lot of money as electricity bill is low
- Tax breaks from government in form of installation charges and solar panel charges
- Environment friendly
- Solar panel costs are very high
- The rebates available are not sufficient with the capital costs
- High maintaining and not very reliable source for the whole year
Private cum business solar panels
Solar panels are also used in dual ways i.e. personal cum business use. For personal use the tax imposed is low and there is no tax on income generated from feed in tariff income but if the income is generated from commercial finance use than that income will be taxable. In personal use the person cannot ask for deduction of solar panel costs and installation charges but in commercial use those charges can be deducted (GOVERNMENT, AUSTRALIAN). Where commercial solar panels are given higher rates for the surplus energy produced. But with rise in Australian states governments substantial reduction in feed-in tariff for unused electricity, the demand for solar panels has decreased while the number of installer has gone up which has given rise to competition and production of bad quality products has risen (MERCER, Phil, 2014).
- Easier to install
- Higher tax rebates
- Lower electricity bill
- Higher maintenance cost
- Higher capital investments
- Low savings
After discussing the various dimensions of taxation in Australia on solar panel we can say that all the three forms have their own sets of advantages and disadvantages, and the solar panel should be chosen according to the requirement of the electricity. We would suggest that a dual use is the best solar panel as it gives the benefit of both the systems private and business but it does not give us the disadvantages associated with the private and business use.
- BIOFUELS ASSOCIATION OF AUSTRALIA. 2013. What is the Small scale Renewable Energy Scheme (SRES)? [online]. [Accessed 19 may 2014]. Available from World Wide Web: <http://www.biofuelsassociation.com.au/ret/what-is-small-scale-res>
- CANBERRA, High commisssion of india. Market report on renewable energy in australia. High Commission of India, Canberra.
- CLEAN ENERGY COUNCIL. (n.d.). feed in tariffs. [online]. [Accessed 19 may 2014]. Available from World Wide Web: <http://www.solaraccreditation.com.au/consumers/purchasing-your-solar-pv-system/government-schemes/feed-in-tariffs.html>
- CLEAN ENERGY REGULAROR. 2013. the small scale renewable energy scheme. [online]. [Accessed 19 may 2014]. Available from World Wide Web: <http://ret.cleanenergyregulator.gov.au/About-the-Schemes/sres>
- CLEAN ENERGY REGULATOR. 2013. The Large-scale Renewable Energy Target (LRET). [online]. [Accessed 19 may 2014]. Available from World Wide Web: <http://ret.cleanenergyregulator.gov.au/About-the-Schemes/lret>
- COM. (n.d.). large scale solar deployment in australia. [online]. [Accessed 19 may 2014]. Available from World Wide Web: <dancass.com/static/files/assets/./Large-Scale-Solar-Discussion-Paper-1.doc