Pensioners, Solar Power And Feed In Tariffs

A recent news story has created uncertainty among pensioners regarding the income they receive from solar feed in tariffs. According to Energy Matters, while feed in tariffs would be counted as income for social security purposes, that doesn't mean to say pensioners would have their benefits cut or even reduced

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UPDATE 19 May: It appears while electricity account credits earned under feed in tariff programs will not be subject to pension income tests, credits paid as cash, cheque or direct deposit will be. Further details here.

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A recent article in the Sydney Morning Herald concerning pensioners who install solar power systems having any earnings through feed in tariffs* or credit counted as income affecting pension payments has met with some strong reactions.

According to Max Sylvester, co-founder of national solar power solutions provider Energy Matters, “We looked into this situation a while back and were advised that payments from feed in tariffs would be counted as income for social security purposes – but that doesn’t mean to say pensioners would have their benefits cut or even reduced.”

“For a person’s pension to be affected their total assessable income would have to exceed the relevant income test free areas. The pension income free area from July 1 last year is $142 a fortnight for singles and $248 a fortnight for couples combined. The average home solar power system, 1.5kW in capacity, will not generate anywhere near that amount of revenue.”

However, Mr. Sylvester says that given the contribution made by home solar power systems in reducing Australia’s greenhouse gas emissions and the capital outlay involved; perhaps feed in tariff revenue should not be included in the income test for pensioners, allowing them other avenues of income generation that is included.

The SMH article has also generated an uptick of questions regarding feed in tariffs and taxation generally.

“At this point, there doesn’t appear to be any specific taxation legislation dealing with income derived from feed in tariffs.” says Mr. Sylvester.

“Whether it is generally assessable income depends on the income producing nature of the activity. If it can be demonstrated that the system was installed with a view to making a profit, then receipts under the feed in tariff would be considered assessable income, but all expenses associated with the income generating activity would also be deductible, such as depreciation.”

“In most cases, it’s our understanding revenue generated by home systems would not be taxable as they would be considered personal use or hobby related.”

Mr. Sylvester advises that people who may be affected should consult with their local Centrelink Office, the ATO or accountant for clarification.

* Feed in tariffs are an incentive whereby owners of solar power systems are paid a premium rate for electricity produced. Under a gross feed in tariff model such as that exists in the ACT and NSW, all electricity generated is eligible for a premium payment. In other states with feed in tariffs, a net model is used where the premium rate paid is only applied to surplus electricity exported to the mains grid. Learn more about feed in tariffs and other solar rebates.

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