Doing the sums on solar batteries as energy crisis looms in Australia

The energy crisis is making headlines, with fears at one point that Queensland and NSW could face possible blackouts. Of course, the powers that be are scrambling to find a solution, but this problem won't be quick, easy or cheap to solve.

Let me tell you about my own experience with renewables. About eight years ago, we installed a 24-panel solar system, which cost around $6000. The system now tells me it has generated 53,000 kWh of power. At an average cost of $0.25 a unit, that means we have recouped over $13,000 on our $6000 investment. So far, so great.

Then, 18 months ago, we found ourselves fairly cashed up thanks to some refunded overseas trips that did not occur due to COVID. We decided to spend the money on installing a solar battery.

We chose the Tesla power wall, which at that stage had the biggest capacity available - 14 kW - and cost $12,000 to install.

It's a great asset to have, because it means that you always have backup capacity available in the event of a power failure. That in itself is quite a significant value - although it's impossible to quantify. But there is no way that the mathematics of the investment works.

The battery might have a capacity of 14 kWh, but because it always keeps 15 per cent in reserve, the effective capacity is only 12 kWh, which at the going rate of $0.25 a unit is worth just three dollars.

If we filled the battery every day for a year, the maximum savings it would give us would be only around $1000.

The Tesla battery has a magnificent app that enables me to monitor my system's energy generation and usage closely.

One thing is obvious: on a cloudy day there is not much solar power produced, and on a rainy day almost nil. So even that $1000 saving is by no means guaranteed.

The press has been focusing on the cold winter that is with us, and what a huge use of power heating a house takes. But for Queenslanders, an encouraging fact is that the cheapest heating is reverse cycle air-conditioning, and it is far more efficient at heating a house than at cooling a house.

There is lots of well-meaning advice telling low-income earners to get solar power and think about a battery.

But there is no good news here. My solar people tell me the cheapest battery - which would be just 6 kW - would cost at least $7000 installed. After the 15 per cent reserve for power failures, this gives you just five extra kilowatts, worth just over a dollar.

If you've got a dishwasher, a clothes dryer and air-conditioner on, you can easily go through 5 kWh in an hour. That's the battery emptied.

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Of course, things will change in the future as technology improves - but right now solar batteries are going up in price not down. Battery cost will not become attractive quickly.

To make matters worse we are being urged to buy electric vehicles, but because there have been no coherent national policies to encourage their uptake, their price is exorbitant, and they would be a further drag on our already overstretched electricity supply.

Wishing and hoping won't fix climate change.

The closure of the remaining coal-fired and gas-fired generators will not be determined by billionaires, affluent ideologues, or anyone else for that matter.

Those generators will shut down when a full suite of cost-competitive, cleaner technology, transmission and storage is available to replace them.

Question

We would like to financially help our children who are both in their 30s. Our daughter lives in a Sydney unit, which is owned outright by my wife. We would eventually like to transfer ownership to her. The unit was purchased in 2007. We would also like to help our son and his family buy a residential property.

We are self-funded retirees with shares, cash, and an SMSF which also has some shares and cash.

We would appreciate advice on the best way to do this with regards to the taxation implications for all parties.

Answer

You really do need some expert advice here. It would be prudent to transfer the unit to your daughter as soon as possible because when you do die there will be a substantial CGT liability on that property. This is not triggered by your death, but will be payable at some stage in the future if she sells. The dilemma you face is that the CGT may be large right now, but will only get larger as time passes.

You and your advisors will need to do the sums. It may be possible to reduce CGT by making concessional superannuation contributions.

As far as your son goes you could withdraw money from your superannuation fund tax free providing you are over 60. If your fund is in pension mode there would be no CGT on assets that would be liquidated to help provide the money you wish to gift your son. Just make sure you do not have your name on the title deed otherwise you will end up with the same problem that you already have with your daughter.

The big decision will be whether the money is to be a loan or a gift. If it's a gift there could be complications if the relationship breaks down.

Question

I am 74 and have my 75th birthday in January - my wife will be 75 this October. We both have some money in super and would like to withdraw $70,000 and then in a few months put it back in again. We're also keen to add more to our super. Would we be able to do this?

Answer

From July 1 anybody may make non-concessional contributions to super until the age of 75 without passing the work test. Provided your superannuation balance does not exceed $1.7 million when you wish to make the contribution you are able to withdraw the money and then re-contribute. There is no entry tax on re-contributed funds.

Question

I don't quite understand the logic in the answer you gave to a recent question. You recommended that the person set up their pension accounts with the equivalent of four year's expenditure into the cash option and to put the rest into the balanced option. Normally such a generic structure is designed to allow a person to live on cash reserves during a period of poor stock market performance and not have to effectively sell shares at a depressed prices to finance living expenses. However, in the case of pensions drawn from super funds, it is my understanding that pensions must be paid proportionately from all pension options held. Therefore, in market downturns, there will be some selling at depressed prices. Am I missing something?

Answer

Most large superannuation funds give you an option as to which sectors of their offerings you wish to hold your money in. Furthermore, you are allowed to choose which of these sectors you wish to draw your pension from. Some even have the option of allowing you to take say 80 per cent from the cash option and say 20 per cent from another option. If your fund doesn't offer this service I suggest you think about changing funds.

Question

I have a small super account with Australian Super that I kept open when I heard talk of the changes taking effect from 1/7/22. I've been in touch with Australian Super and they say that I can't put personal non concessional contributions as I am too old. I turn 74 next month.

I don't want to go to a financial advisor and get charged for a financial plan that I don't want or need, I just need an answer to the question as to whether I can do this - how much I am permitted to put in (I have $400,000) and I want to make use of the bring-forward rule to do this? I have made no super contributions for over a decade to any fund.

Answer

To make concessional contributions, the tax-deductible ones, between age 67 and age 75, you must pass a work test which involves working 40 hours over 30 consecutive days in the financial year you make the contribution. After July 1, when the rules have changed, you could contribute up to $330,000 as a non-concessional contribution to your superfund using the bring forward rules.