The bookkeeping complexity in the renewable energy sector is not the solar panels — it is the certificate markets that sit alongside the physical installation. STCs and LGCs are tradeable instruments with their own recognition, measurement, and GST treatment that most standard bookkeeping workflows are not designed to handle.
Small-Scale Technology Certificates: Revenue Recognition for Installers
When a solar PV, solar hot water, air source heat pump or small wind system is installed, Small-Scale Technology Certificates can be created for its expected output over the deeming period. The number of STCs is determined by the system's capacity, location (zone), and the remaining deeming period under the Small-scale Renewable Energy Scheme. Creating or registering STCs on the REC Registry does not attract GST.
The right to create the STCs belongs to the system owner. Most owners assign that right to the installer (or to a third-party REC agent) in exchange for an up-front discount on the installation price. This is why most residential customers see a reduced up-front cost. The installer or agent then creates the STCs and sells them to a trader, a liable entity, or through the STC Clearing House.
From the installer's bookkeeping perspective, the STC discount does not reduce the price of the installation. The customer pays part of the price with their STC entitlement instead of cash. The ATO's guidance is that the installer calculates GST on the full price of the system and installation, not the discounted amount. On a $10,000 (GST-inclusive) system with a $2,000 STC discount, the installer's GST is $909.09 even though only $8,000 arrives in the bank. Revenue should likewise be recorded at the full price, with the STCs received recorded as an asset until they are sold. Netting the STC value against revenue or equipment cost understates both revenue and GST.
Whether the installer can claim a GST credit on the STC assignment depends on the system owner:
- Homeowner (not registered for GST): the assignment is not a taxable supply, so there is no GST credit.
- GST-registered business using the system in the business: the assignment is a taxable supply. The owner pays GST based on the amount of the up-front discount and issues a tax invoice (required above $82.50 GST-inclusive), and the installer claims the GST credit.
The installer's subsequent sale of the STCs is a taxable supply if the installer is registered or required to be registered for GST.
Large-Scale Generation Certificates: Inventory vs. Financial Instrument
Utility-scale solar, wind, and hydro generators receive one Large-Scale Generation Certificate per megawatt-hour of eligible renewable electricity generated and fed into the grid. The accounting treatment of LGCs depends on the generator's business model.
A generator that creates LGCs and sells them to electricity retailers under forward contracts is, in substance, holding inventory — the LGCs are produced goods that will be sold in the ordinary course of business. AASB 102 Inventories applies, and the LGCs are measured at the lower of cost and net realisable value.
A generator that creates LGCs and holds them speculatively — waiting for the spot price to rise — may be classifying them as financial instruments under AASB 9 Financial Instruments (specifically, as commodities held for trading). The measurement basis shifts to fair value through profit or loss. The choice of accounting policy has a direct effect on reported income volatility, so it requires deliberate policy selection and disclosure in the financial statements.
GST on LGC sales by a GST-registered generator is at the standard rate of 10%. Renewable energy certificates are not on the list of financial supplies in regulation 40-5.09 of the A New Tax System (Goods and Services Tax) Regulations 2019, so their sale is not input taxed, and no GST-free provision covers them. This matches the ATO's treatment of STCs, where the transfer or sale of certificates by a registered entity is taxable.
Feed-in Tariff Income: GST Registration Implications
The feed-in tariff is a per-kilowatt-hour credit paid by electricity retailers to small generators who export surplus electricity to the grid. For residential property owners, the FiT is generally not income from an enterprise — the household is not carrying on a business of electricity generation — and accordingly the household is not required to register for GST or declare the FiT as business income.
For commercial premises, the analysis differs. A business that installs solar on its commercial property and receives FiT payments is potentially carrying on an enterprise. If the FiT income, added to all other taxable and GST-free supplies of the enterprise, causes total annual turnover to exceed $75,000, GST registration is required under s.23-5 of the GST Act.
More practically, a business that is already GST-registered (as most commercial operators are) must treat FiT income as a taxable supply and remit GST on the payments received from the retailer. The electricity retailer's payment will typically not include GST — the retailer is not paying a GST-inclusive rate. The bookkeeper should confirm the contractual terms: if the FiT is stated as GST-inclusive, the GST component is 1/11th of the payment; if it is stated as GST-exclusive, the business owes GST on top.
Battery Storage Capital Allowances
Battery storage systems installed at commercial premises are depreciating assets under Division 40 of the Income Tax Assessment Act 1997. A small business entity may be able to deduct the cost immediately under the instant asset write-off if the cost is below the threshold that applies for the income year. Temporary full expensing ended on 30 June 2023 and is no longer available for new purchases.
The Commissioner's effective lives are now set by the Income Tax Assessment (Effective Life of Depreciating Assets) Determination 2025 (LI 2025/20), which replaced the withdrawn TR 2022/1. The determination has no specific item for battery storage systems. Its only battery entries cover emergency power supply assets in the electricity industry (15 years), powered hand tools and warehouse vehicles. The solar item, "photovoltaic electricity generating system assets", has a 20-year effective life and expressly covers photovoltaic panels, mounting frames and inverters. It does not mention batteries.
In practice, the owner of a battery storage system must self-assess its effective life under section 40-105 of the ITAA 1997, based on manufacturer warranty periods, expected cycle life and the business's own replacement experience. The owner should document the basis for the chosen period.
Whether a battery installed alongside a solar array is a separate depreciating asset or part of one larger asset depends on whether it performs its own function. A battery that can be added, removed or replaced independently of the panels generally stands as its own asset. Record the basis for that decision in the fixed asset register, because it drives both the effective life and the eligibility for any immediate write-off.
Environmental Rehabilitation Provisions for Large-Scale Solar
Ground-mounted solar farms — utility-scale arrays typically developed on agricultural or pastoral land under long-term lease — almost invariably carry contractual rehabilitation obligations. The lease agreement (and sometimes the development approval conditions) will require the operator to remove all panels, racking, cabling, and transformers at the end of the lease term, and restore the land to approximately its pre-installation condition.
AASB 137 Provisions, Contingent Liabilities and Contingent Assets requires that a provision be recognised for this obligation as soon as the obligation arises — which is typically the date the first panel is installed, because from that point the disturbance has occurred and the obligation to remediate it is a present obligation of certain (though uncertain in amount) extent. The provision is measured at the best estimate of the expenditure required to settle the obligation, discounted to present value where the time value of money is material.
Discounting is invariably material for a 25–30 year asset. The unwinding of the discount (the accretion of the provision to its nominal value over time) is reported as a finance cost in the P&L, not as an operating cost. Bookkeepers working with large-scale solar clients should ensure the rehabilitation provision is calculated, reviewed annually, and correctly presented in the financial statements — its omission is a material misstatement and a common audit finding in the sector.