Rooftop solar tax breaks – what it means for complexes and sectional titles in South Africa – Businesstech


National Treasury says that body corporates and sectional title schemes will not be able to take advantage of the rooftop solar tax breaks announced during the budget speech on Wednesday (22 February).

Finance minister Enoch Godongwana announced the rooftop solar tax incentive, among several other measures being implemented to encourage a widespread and rapid move towards renewable energy in the country.

For private households, individuals who install rooftop solar panels from 1 March 2023 will be able to claim a rebate of 25% of the cost of the panels, up to a maximum of R15,000. This can be used to reduce their tax liability in the 2023/24 tax year. This incentive will be available for one year.

To qualify, the solar panels must be purchased and installed at a private residence, and a certificate of compliance for the installation must be issued from 1 March 2023 to 29 February 2024.

Individuals will be able to claim the rebate if they have a VAT invoice that indicates the cost of the solar PV panels separately from other items, along with proof of payment, as well as a certificate of compliance evidencing that the solar PV panels were brought into use for the first time in the period from 1 March 2023 to 29 February 2024.

PAYE taxpayers will be able to claim the rebate on assessment during 2023/24 filing season. Provisional taxpayers will be able to claim the rebate against provisional and final payments.

However, because the rooftop solar tax break is aimed squarely at individuals, complexes and their body corporates cannot take part in the incentive.

Complex issue

According to Treasury, there has been little indication that many body corporates would want to purchase solar installations instead of leasing them or using other options to avoid up-front costs for members. Hence, they were not considered in the setting up of the scheme.

However, it added that the government would continue to assess and consult on this aspect, and solutions could be found.

“If there is widespread interest in body corporates purchasing and installing solar panels, then payment (e.g. special levies) for solar installations levied from the occupants would have to indicate the cost of the solar panels separately – as would be the case for any other claimant,” said the Treasury.

“The applicable Certificate of Compliance data would also have to be shared with the South African Revenue Service. Because there would be some adjustments to ensure that the right people could claim the right amounts, there will be a consultation to determine the required approach and documentation.”

For those who rent their homes, there is no ownership limitation for the incentive, so installation by landlords or renters would be eligible, but only the party that pays for the solar panel can claim the rebate.

As it stands, within complexes and sectional titles, if occupants of such schemes are able to install their own panels, then the tax incentive applies to each individual.

Inverters not covered

Most complexes and sectional title schemes cannot afford the up-front costs of installing solar for the whole scheme, and so it is often left up to individual owners to sort out their own backups.

One of the easiest ways to address the power needs for small units of this nature is to install an inverter or use a generator (if allowed by the body corporate).

The bad news for homeowners looking to go this route is that inverters, batteries and generators are not covered by the incentive at all.

According to Treasury, this is because the incentive is solely focused on boosting additional generation capacity – and these load shedding mitigation tools either do not generate additional power, or are not sustainable generators.

“Diesel generators are often used as emergency back-up, but are not a sustainable solution to generate additional power. They increase demand for fuel and have negative environmental impacts,” it said.

“Including generators would detract from the climate objectives government is committed to, where fiscal instruments like the carbon tax play an important role.”

While an inverter and batteries are required to use solar panels, inverters and batteries can be operated without solar panels – in which case they offer no additional capacity to the system.

“The focus on solar PV panels is to maximize the use of limited government funds to get as much additional generation capacity as possible – and recognizes that government will have to focus on a partial rebate of the components that are most directly linked to generation . This is why installation costs are not included either,” Treasury said.

Not enough

According to the solar PV industry association, SAPVIA, while the rebates are a step in the right direction, they do not go far enough in addressing South Africa’s power crisis and the desperate need of households to escape load shedding.

“Solar panels alone do not protect end users against load shedding,” it said. “The solar panels incentive is limited and does not address those households that can’t access instruments for the purchase of solar systems.”

At best, those who install panels will only get up to R15,000 back from their taxable income. Based on a 25% cap this could translate to a solar system of R60,000 which SAPVIA said will not make a meaningful impact for the average household without storage.

The group noted that an average household in South Africa tends to purchase a 5kW hybrid system, including panels and battery storage, which ranges from R95,000 to R200,000, depending on the components used.

“Incentivizing solar PV is a step in the right direction. However we urge government to consult with SAPVIA as industry experts to finetune and improve the design of relief packages and financial instruments.”

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