Often clients in their last few years of work use surplus income to install water tanks, freshen up their white goods, renovate kitchens and bathrooms to have their house ready for a comfortable low cost, low maintenance retirement. Solar panel installation has been another popular project for those entering retirement if it hasn’t already been done.
Recent developments in the energy market have created some scepticism and I have heard some clients question whether future rule changes could take away the benefits of solar installation.
Fears are that the regulators can turn off your panels in peak production times another is that they will soon scrap rebates and be charging you to feed power into the grid.
South Australia seems to be the state to watch regarding renewables. It doesn’t seem that long ago we had the state-wide blackout in 2016. Since then, we have led the charge in roof top solar with over 280,000 houses (close to 35% of houses) collecting energy from the sun. Along with large scale solar farms and wind turbines we produce large amounts of renewable energy but being an unpredictable supply causes headaches keeping the power grid stable.
Just last Sunday, Australia broke new ground with rooftop solar and large-scale solar farms producing more output than coal into the main grid. On the same day South Australia had wind and solar supply 100% of all local demand during daylight hours.
These events cause wholesale markets to price electricity negatively. Other days we see supply shortages (most recently due to a fire on Torrens Island) where wholesale prices reach $15,000 per MW hour and we were close to load shedding blackouts.
Experts are saying that the rapid rise of solar may see the state government wind back subsidies sooner providing another reason to get into the system before this happens. It is recommended to talk to a solar expert and have quotes produced to determine if your situation warrants the installation of solar as everyone’s situation is different. This can be due to your usage patterns the type of roof you have or which direction it faces etc.
One factor for retirees considering solar is the added benefit of a potential increase in Age Pension. As Centrelink consider permanent fixtures such as a home’s solar panels as part of the home, they are an exempt asset. Assets tested part age pensioners who purchase solar panels will see an increase in their age pension. For example, they would see an increase of $390 pa for a $5,000 solar system installed. This equates to a 7.8% return before electricity cost savings and potential feed in tariffs are added into the return calculations.
Centrelink do not assess feed-in tariffs as income if they are received as a credit to reduce your electricity bill. Only if the credits are received as a cash payment are they assessed as income.
The ATO has confirmed that solar fee-in tariffs from a residential home are not taxable. They consider it as minor profits from a hobby and not business activity.
We recommend you discuss the potential Centrelink benefits with your adviser to confirm if they apply to your situation and that you speak to a solar expert regarding the current government subsidies and electricity cost saving potential for your household.
As we in Adelaide endure some of the most expensive electricity pricing in the world it is little wonder we are leading the world in roof top solar installation.