STC GST treatment for installers: the BAS view

STC income looks like one line in your books, but for GST purposes a typical residential install contains two separate transactions. You supply a system to the customer, and you then sell the certificates you took in return for the discount. Each has its own value, its own GST and its own place on your Business Activity Statement. Treating them as one is the usual reason installers get confused at BAS time.

This guide is general information, written at the time of writing from the ATO’s published guidance on GST and the Small-scale Renewable Energy Scheme. It is not tax advice. Rules and rulings change, and your own facts matter, so read this alongside your accountant’s advice and the ATO’s page. For a plainer overview, see GST and STCs and the RCTI, GST and ABN guide.

The two supplies

Supply 1: the installed system

When you sell and install a system and you are registered, or required to be registered, for GST, you make a taxable supply to the customer. The ATO’s guidance on the scheme treats the value of that supply as the full price of the system, including the value of the up-front discount the customer receives for assigning the certificates. In the ATO’s example, a customer pays $6,700 including GST after a $1,000 discount, and the supply of the installed system has a GST-inclusive price of $7,700.

On that example, GST is one eleventh of $7,700, which is $700.

Supply 2: the certificates you sell

Once you hold the right to create the certificates, you create them in the registry and sell them to a trader. If you are registered or required to be registered, the sale is generally a taxable supply too, and the GST is based on the amount of the sale. The ATO notes that a tax invoice is required where the amount is more than $82.50 including GST. With an RCTI arrangement the trader, as buyer, creates the tax invoice on your behalf. See recipient-created tax invoices for STCs.

A worked example

A 6.6 kW system, 45 STCs, with the customer’s discount valued at $38.50 per STC for the example.

Two things to note. First, the example figures are illustrative and the rate a trader quotes is usually ex GST, so check whether a published rate includes or excludes it. Second, a worked example cannot settle your position, because whether an input tax credit or another adjustment applies depends on the facts of the transaction. Your accountant should map each line to the right BAS label.

What the BAS needs

For each period, you will need to bring together:

1. Sales of systems: the full price, including the value of the STC discount, per the ATO’s treatment.
2. Sales of certificates: the amounts on your RCTIs from the trader.
3. Purchases: GST credits on equipment, subcontractors and expenses, as usual.
4. Timing: whether you report on a cash or accrual basis, which changes when each supply is recognised.

If you are on a cash basis, certificate income is recognised when you are paid, so faster settlement pulls the GST forward as well as the cash. Plan a GST reserve in a separate account so the payment on the BAS never comes as a surprise. See how to improve installer cash flow for how to build one.

Unregistered installers

If you are not registered and not required to be, you do not charge GST on the system or on the sale of certificates. You still need an ABN to be paid, and certificate income counts toward your GST turnover. If your turnover is close to the registration threshold, an STC-heavy business can cross it faster than you expect. Talk to your accountant before you reach it, not after.

Residential and business customers

The ATO guidance also distinguishes between a household system and one used in a business. Where a business owner assigns the STC right in return for a discount, GST can apply to the owner’s supply as well. If you install for business customers, they should check their own position, and you should keep the documents that show the discount and the assignment.

Documentation that backs up the treatment

• The signed assignment form showing the discount. See STC assignment form.
• The customer invoice showing the gross price, the discount and the net price.
• The trader’s RCTI for each batch of certificates.
• Your remittance records, matched to claims.
• Your accountant’s note on the method used.

Keep them with the job file. Audit evidence for the certificates and evidence for the tax treatment live together. See how STC audits work.

Where traders fit

A trader that issues RCTIs consistently, shows GST separately and describes the rate as ex or inc GST clearly will save your bookkeeper time. At Energy Merchants, claims are paid on an RCTI basis for eligible partners and the rate on /pricing/ is the published rate, so check the page for how it is stated. Our zero-fee policy means no fee lines to reconcile either.

Questions to take to your accountant

Bring a short list so the meeting is useful. First, confirm whether you are registered and from what date. Second, ask how they want the up-front discount shown on your customer invoices. Third, ask whether you report on a cash or accrual basis and what that means for certificate income. Fourth, ask how RCTIs should be reflected in your BAS, and whether any adjustment applies between the two supplies described above. Fifth, ask about records: what they want to see per job, and for how long. Finally, tell them about your growth plans. A crew that expects to double STC volume next year may face different cash and GST timing, and it is far cheaper to plan for it than to explain it later.

What to do next

1. Ask your accountant to confirm your GST registration, accounting method and BAS treatment of both supplies.
2. Put the full price, discount and net price on every customer invoice.
3. Reconcile RCTIs against your books monthly.
4. Keep a GST reserve account.
5. Read the ATO’s page on GST and the Small-scale Renewable Energy Scheme, and the how it works page for the claim flow.