Sun Tax

Since feed-in tariffs were introduced way back in 2008, there has been an incentive for installing solar. But lately, I’m getting asked a lot about the “sun tax”. Customers want to know what is it? And also why am I being charged more? So, let’s have a look at what this new sun tax is and whether it’s as bad as it sounds.

What is the Sun Tax?

Sun tax refers to a set of new solar export tariffs. This shift towards a two-way pricing system will see energy companies charging customers for excess electricity exported to the grid during peak periods of solar generation but low energy demand. The Australian Energy Market Commission approved the change to tariffs in 2021.

With the increased uptake of residential and commercial solar, energy grids are being used to receive energy as well as send it back. The network needs updating to meet these increased demands. The sun tax aims to encourage owners of solar to send their exported energy into the grid later in the day. This will help to avoid power surges during peak periods, while also paying for the changes to distribution networks.

Who is affected by Sun Tax?

In short, anyone with solar panels that export to the grid will be affected by the sun tax. Whether your system is for business or residential, if it exports excess electricity back to the grid, you will be subject to the new tariff structure.

Will there be a Sun Tax in NSW?

Since July 2024 new and existing owners of solar systems have been able to opt-in to the two-way tariff. It’s currently planned that the sun tax will be applied to NSW customers from 1st July 2025.

Electricity distributors have explained the charges of the sun tax in NSW:

• Customers will be charged 1.2c / kWh for exports between 10am – 3pm
• Customers will be rewarded 2.3c / kWh for exports between 4pm – 9pm

It’s important to note that there will be an “export free threshold” between 10am and 3pm. Depending on who your energy distributor is, your threshold will vary. However, there will be an amount of energy you can export to the grid without being charged. Once you exceed that threshold, the tariff will kick in.

Electricity companies are aiming to apply the charges so that it only affects the feed-in tariff and won’t appear as an additional charge on your bill. Ausgrid in NSW estimates that the annual cost on your average 5kW residential system will amount to $6.50 per year, which is only 13c per week.

Pros and Cons of the Sun Tax

Like everything, there are both pros and cons of the sun tax. Here’s how we have weighed it up:

Pros of Sun Tax:

• Improves grid stability: Reducing grid overload during peak periods will help maintain voltage levels and prevent outages.
• Encourages smart energy use: Encourages solar owners to use more of their own power or store it in batteries rather than exporting it.
• Fair cost distribution: Aims to ensure that non-solar users aren’t subsidising the grid upgrades needed to deal with over-exporting of solar energy to the grid.

Cons of Sun Tax:

• May discourage solar: It could make solar less financially appealing to new customers.
• Smaller financial returns: Exporting energy was once a way to earn savings on power bills, now users pay have to pay for sending their solar power to the grid.

How to minimise Sun Tax

There are ways to minimise the sun tax. You can shift your energy usage to ensure that you’re consuming most of your own solar production during the day. You could also monitor the thresholds and free export limits to avoid charges.

One of the main ways to take control of your solar system and avoid the sun tax is to install a solar battery. This will allow you to store your own power so that you use it all, whenever you need it, rather than sending it to the grid.

When you consider the sun tax, time-of-use tariffs and metering, the payback for a battery can now be as little as 18 months. It is becoming an economically sound choice to add a solar battery to your home or business solar system. At SolarBright I’ve helped to save customers thousands on power bills with the right battery. We have a range of solar batteries available to fit your needs and minimise the effect of the sun tax on your solar system.

Take Advantage of Solar Battery Rebates

To make solar batteries even more accessible, both NSW Solar Battery rebates and Federal governments battery rebates offer to reduce installation costs for NSW households and businesses. The NSW Peak Demand Reduction Scheme (PDRS) provides upfront discounts of $1,600–$2,400 for installing approved battery systems.

The Federal Cheaper Home Batteries Program, starting July 1, 2025, offers up to $372 per usable kWh, potentially saving $3,000–$4,000 on a 10–13.5 kWh battery. These incentives make it easier to store excess solar energy. Use our NSW Battery Rebate Calculator and Federal Government Battery Rebate Calculator to estimate how much you can save with your solar battery system.

How to choose the best Solar Battery

First, consider how much storage you’ll need for your system. Battery capacity is measured in kilowatt hours (kWh), but the usable storage capacity is often 80-90% of that full capacity. You should also consider which batteries are compatible with your inverter. Some lithium batteries only work with certain hybrid inverters. Before making a purchase it’s best to have a chat with a professional to ensure all elements of your system will work together.

Lastly, you’ll want to ensure that the battery you’re considering comes with at least a 10 year warranty. This indicates that the manufacturer has confidence in the product and that they’ll be there for you when something goes wrong.

Hopefully I’ve helped decipher the sun tax. If you need any more information on two-way pricing or would like to talk to one of our solar and battery experts call SolarBright today.