Solar on rental properties in Perth: what landlords need to know

Installing solar on a rental property in Perth is increasingly common — landlords reduce the property's running costs, and tenants benefit from lower electricity bills. Here's how the economics and tax treatment work for Perth landlords.

This article provides general information. Consult a registered tax agent for advice specific to your situation.

Can landlords claim solar as a tax deduction?

Yes. Solar panels installed on a rental property are a capital work — they are permanently affixed to the building and improve the property. Under Australian tax law, capital works on rental properties are depreciable.

Capital works deduction (Division 43): For a system installed after 26 May 1992, the ATO allows a 2.5% capital works deduction per year on the construction cost. For a $10,000 solar installation, this equals $250/year for 40 years.

Plant and equipment (Division 40): Some components of a solar installation are treated as plant and equipment rather than capital works:

• Inverter: Depreciable at ATO effective life (10 years); diminishing value rate 20%/year
• Battery (if installed): Depreciable at ATO effective life (5 years); diminishing value rate 40%/year
• Panels: These have historically been treated as capital works attached to the building, not as removable plant and equipment — confirm current ATO treatment with your tax agent

Immediate deduction vs depreciation: As of 2024-25, residential property investors cannot apply the small business instant asset write-off. Capital works must be depreciated at the 2.5% rate, and plant and equipment at the relevant effective life rate.

Can landlords increase rent after installing solar?

Landlords can increase rent on a rental property, but increases are governed by WA residential tenancy law. Under the Residential Tenancies Act 1987 (WA):

• Rent cannot be increased during a fixed-term tenancy unless the lease explicitly provides for it
• For periodic tenancies, at least 60 days written notice is required before a rent increase
• Rent can only be increased once in any 12-month period (as of 2024 WA amendment)

Whether a rent increase is justified by solar depends on the local rental market. In Perth's current tight rental market, solar may allow a landlord to maintain a competitive property rather than increase rent — the question is whether tenants value lower electricity bills enough to accept higher rent.

From a negotiation standpoint, some Perth landlords have found it more effective to market the solar as a selling point for quality tenants (who care about running costs) rather than immediately seeking a rent increase.

What tenants gain from rental property solar

Tenants benefit directly from solar if:

1. They're on the Synergy A1 tariff: Electricity they consume from the solar system is free (saving 33.26c/kWh). During daylight hours, a solar-equipped rental home uses less grid electricity.

2. DEBS is registered in the landlord's name: The landlord receives DEBS export credits — tenants don't receive the feed-in credit unless there's a special arrangement.

3. The system is well-sized for the property: A 6.6kW system on a 3-bedroom Perth rental home typically generates 9,000–10,000 kWh/year. A typical 3-person household uses 15,000–20,000 kWh/year. The solar covers 45–65% of consumption.

Important: The tenant's electricity account is still with Synergy — they pay for grid consumption at standard tariff rates. Solar reduces the kWh they need to import from the grid, but they don't receive the DEBS credit (which goes to the landlord's or the property's account).

Who registers the DEBS account?

DEBS export credit goes to whoever is the account holder for the electricity service at the property. For rental properties, this is typically either:

• The landlord (if the electricity account is in the landlord's name — more common in furnished or utilities-included rentals)
• The tenant (if the tenant has their own Synergy account — more common in unfurnished, standard residential rentals)

In most Perth rentals, the tenant opens their own Synergy account. When they do, the DEBS credit attaches to their account. The landlord installs solar and the tenant receives the export credit. The landlord doesn't receive ongoing DEBS income — the solar benefit is in the capital works depreciation and the property's attractiveness.

Practical implication: Before installing solar on a rental property, understand that DEBS may go to the tenant's electricity account, not the landlord's. This is actually positive for the tenant-landlord relationship (tenants see real bill savings) but means the landlord's return is through capital appreciation, depreciation deductions, and potentially higher rents or lower vacancy.

Practical considerations for rental property solar installation

Lease implications: Check your current lease before installation. Major works during a tenancy should be arranged with appropriate notice. Western Power connection work requires access to the switchboard and roof — coordinate with the tenant.

Choice of installer: Choose a CEC-accredited installer who is familiar with investment property installations and can provide a tax invoice with clear description of components (panels, inverter, mounting) to support your depreciation schedule.

Documentation: Keep all documentation — installation contract, invoices, Western Power NCN, CEC certificate — for tax purposes and for disclosure to future tenants or buyers.

When the property is sold: On sale of the property, solar panels (as capital works) are included in the property value. The depreciation schedule may need to be updated. Capital gains tax implications should be discussed with your tax agent.

Comparison with other energy efficiency improvements

Solar is the highest-profile energy efficiency improvement for Perth rentals, but it's worth comparing with alternatives if budget is limited:

• Insulation: Ceiling insulation in Perth's older homes (pre-1970) can significantly reduce cooling load and has a lower installed cost than solar ($2,000–$5,000)
• Air conditioner replacement: Upgrading old inefficient split systems to modern inverter-type units (5-star efficiency) reduces tenant electricity bills without a solar requirement
• LED lighting retrofit: Very low cost, immediate energy saving

For a new or recently upgraded property where cooling loads are already addressed, solar is the most impactful energy improvement. For an older property with poor insulation or inefficient appliances, the combination may deliver better total savings.

Perth landlords can depreciate solar installations as capital works (2.5%/year, 40 years) plus plant and equipment for inverter and battery. DEBS export credits typically attach to the tenant's electricity account in standard rentals. The investment case rests on depreciation deductions, capital value uplift, and competitive advantage in Perth's rental market.