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Edited version of your written advice

Authorisation Number: 1013003639462

Date of advice: 28 April 2016

Ruling

Subject: GST and Small-scale Technology Certificates

Question

What is the correct Goods and Services Tax (GST) treatment of the supply of the right to create STCs by the non-GST registered home owners in relation to your sale and installation of solar panel systems?

Answer

The home owners are supplying the STC rights to a trading house in order to receive a discount of their purchase of solar panel systems from you. They are not assigning these rights to you and you do not supply these rights to the trading house.

Relevant facts and circumstances

Small-scale renewable energy scheme

The Small-scale Renewable Energy scheme was implemented to help with the upfront cost of purchasing eligible solar water heaters and small generation units through supplying a right to create STC.

Owners of the installed solar panel systems can assign their right to create STC to the retailer/installer or to a trading house in exchange for a delayed cash payment and/or an upfront discount on the purchase of the eligible system.

You are a sole trader registered for GST.

You sell and install solar systems. You source all work under your own contracting licence.

When you supply the solar systems to your customers, the customers assign their right to create small-scale technology certificates (STC) to another entity, a trading house, in exchange for an upfront discount on the purchase of the eligible system.

You issue an invoice to the customer covering the full labour and materials costs + GST. The discounted amount is stated and described as: 'Discount for assigning rights to create STCs'

You issue an invoice to an STC trading house. The quantity of STCs is stated, the unit cost for each and the total value. The name of the customer and address is contained in the invoice. The Description field states: 'STC solar credits assigned to X'.

You prepare and send an invoice for the supply of STCs from the customer to X stating the quantity and value of the STCs.

You are not an agent for the customer.

Where the customer is not registered for GST, you do not add any GST to the value of the STCs however this would be done if the customer is a commercial client and is registered for GST.

X sells the STC shares for money. You receive your portion of those shares in the form of dollars. This amount represents the discounted amount.

Relevant legislative provisions

A New Tax System (Goods and Services Tax) Act 1999 Section 9-5

Reasons for decision

You make a taxable supply if you satisfy all of the requirements of section 9-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act).

Section 9-5 of the GST Act provides that you make a taxable supply if you make the supply for consideration; and the supply is made in the course or furtherance of an enterprise that you carry on; and the supply is connected with Australia and you are registered or required to be registered.

However, the supply is not a taxable supply to the extent that it is GST-free or input taxed.

The supply of solar panel systems or the supply of the right to create small-scale technology certificates (STC) is not GST- free or input taxed.

Supply of STC and GST

A sale for GST purposes includes an assignment of a right. When the owners assign their right to create STC to a retailer/installer or trading house, it is considered that the owners are making a supply of a right for GST purposes.

If the supply of STC satisfies all of the requirements of section 9-5 of the GST Act, the supply will be a taxable supply and the sale price includes GST. However, if the assignment of the right to create STC is made by someone who is not registered or required to be registered for GST, then the assignment will not be subject to GST.

In this case, when you supply the solar panel systems to your customers, they assign their right to create STC to the trading house. You provide a discount to your customers equal to the value of the STC and the trading house reimburses the amount of discount you have provided to your customers.

When the owners of the solar panel systems assign their right to create STC directly to the trading house, they are making a supply of a right to create the STC for GST purposes, as explained above. They are not making the supply of a right to create the STC to you. Therefore, the ownership of the STC is held by the trading house and not by you. Although you prepare the customer's invoice and send this on behalf of the customer to the trading house, you are not making a supply of STCs.

If the owners of the solar panel systems are registered or required to be registered for GST, then they will be making a taxable supply when they assign their right to create STC to the trading house and are required to remit GST on the supply of the right to create STC. However they are not required to do this if they are not registered for GST.

Based on the information provided, you do not acquire the right to create STC from your customers when you supply the solar systems. It is considered that your invoices to the customer and trading house evidences the assignment from the customer to the trading house and you receive the value of the STC from the trading house.

There is no supply made by you to the trading house. The payments you receive from your customers and the trading house would be the total consideration for the supply of solar panel system. Therefore you are required to remit GST of one-eleventh on the total consideration received for the supply of the solar panel system.

Summary

Supply of solar system

A GST registered installer remits GST of 1/1th of the full price for the installation. This is so even if the customer receives a discount for assigning STC rights to a 3rd party because the installer eventually receives the balance from the 3rd party thereby receiving the full amount.

Assignment of STC rights from non GST registered customer to clearing house

The installer is not making any supply of STC rights when creating the invoice for the customer.

There is no taxable supply of the STC assignment so the invoiced amount prepared by the installer on behalf of the customer does not contain any GST. The payment of this amount by the 3rd party to the installer does not contain any GST.

Where installer receives the STC rights and transfers them to a 3rd party

If the installer is registered for GST, this supply would be made in furtherance of its enterprise so the supply to the 3rd party would be a taxable supply and GST has to be remitted. It does not matter if the customer is GST registered or not as the installer is making a separate supply to the supply made by the customer.

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