Find out what your home actually needs
The fundamental challenge of solar on rental properties is sometimes called the split incentive. You pay for the system. The tenant benefits from the lower electricity bills. This makes solar on rental properties harder to justify than solar on your own home, where you capture every cent of the electricity savings directly.
The case still works, but it rests on different foundations: the STC rebate that reduces your upfront cost, the depreciation deductions that reduce your taxable income, the capital value premium that solar adds to the property, and the rental market advantage of a solar-equipped home that attracts more applications and can lease faster.
Understanding each of these levers, and which apply to your situation, is how you evaluate whether solar on your rental property stacks up.
The STC rebate applies to rental properties
The federal Small-scale Technology Certificate (STC) scheme applies to solar on rental properties the same as any other residential installation. The rebate is applied as an upfront discount by the installer, reducing what you pay out of pocket from day one.
| System size | STC rebate (Zone 3) | Installed cost (after rebate) |
|---|---|---|
| 5kW | ~$2,200\u2013$2,600 | $3,600\u2013$5,800 |
| 6.6kW | ~$2,800\u2013$3,400 | $4,784\u2013$7,875 |
| 10kW | ~$4,200\u2013$5,000 | $7,500\u2013$12,000 |
The rebate phases down each year and ends in 2031, so there is a modest but genuine financial advantage to acting sooner rather than later. For most residential rental properties, a 6.6kW system is the standard choice. Use the STC calculator to see the exact rebate for your postcode.
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ATO depreciation: how the tax deductions work
Solar panels installed on a rental property are a capital improvement, not an immediate deduction. The ATO allows you to depreciate the cost over time. The two main schedules:
Division 43: Capital works (panels and racking)
Solar panels and mounting hardware are generally treated as capital works. You can claim 2.5% of the cost per year for 40 years. On a $6,000 panel and racking cost, that is $150 per year in deductions. Modest on its own, but it accumulates over the long life of the system.
Division 40: Plant and equipment (inverter)
The inverter is typically treated as plant and equipment with an effective life of around 10 to 15 years. Using the diminishing value method, you can claim a larger percentage in the early years. This gives you better deductions earlier in the investment. For properties purchased and solar installed after May 2017, confirm with your tax adviser whether the second-hand plant exclusion applies to your specific situation.
Small business: Instant Asset Write-Off
If you operate your rental property through a structure with annual turnover under the relevant threshold (check ATO.gov.au for the current threshold, as this changes), the Instant Asset Write-Off may allow you to deduct the full cost of the inverter in the year of purchase rather than depreciating it. This can meaningfully accelerate your deductions. Speak with an accountant about whether your structure qualifies.
The tax treatment of solar on investment properties has some nuances. Always confirm with a registered tax agent or accountant before making decisions based on depreciation assumptions. ATO rulings on this area have evolved and your specific ownership structure matters.
Does solar increase the value of a rental property?
Research suggests yes, though the premium is uneven and depends heavily on location and valuer methodology. Studies in Australia have found that quality solar systems can add $6,000 to $10,000 to property valuations at the median, with higher premiums in high-electricity-cost states like South Australia.
RMIT research has tracked a 3 to 5 percent valuation premium for solar properties in some Melbourne and Adelaide markets. The premium is most consistent where electricity prices are high, where buyers place weight on running costs, and where the system is clearly documented and in good condition.
The practical implication: a $6,000 outlay (after rebate) on a $6.6kW system that adds $8,000 to the property valuation is a 33 percent return on capital even before counting any rental premium or tax deductions. Not every market delivers this, but it is a reasonable benchmark for higher-electricity-cost areas.
The rental market reality: who is looking for solar?
The tenant population is increasingly aware of electricity costs and actively searching for solar-equipped rentals. Domain and REA Group data consistently show that energy efficiency features, including solar panels, rank among the top search filters used by renters in tight markets.
For landlords, this translates into a practical advantage. Solar-equipped properties typically receive more enquiries per listing and lease faster than comparable non-solar properties. In a market where a property sits vacant for an additional two to three weeks, the lost rental income often exceeds the cost of a modest solar system over a typical 10-year hold period.
Positioning solar to attract tenants
- check_circleInclude solar capacity in the listing headline and description (e.g. "6.6kW solar, pool of savings for tenants")
- check_circleDocument expected bill savings based on local electricity prices and average generation output
- check_circleIf you have a monitoring app, offer to share read-only access so tenants can track their own generation
- check_circleNote any battery installed on the property, as this is a differentiating feature
- check_circleHighlight relevant rebates the tenant can benefit from, such as any VPP programs the system supports
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Over 3.6 million homes already claiming rebates
Who gets the feed-in tariff: you or your tenant?
In a standard residential rental arrangement, the electricity account is in the tenant's name. The feed-in tariff credits go to whoever holds the electricity account, which means the tenant receives the benefit of solar exports to the grid.
This is the core of the split incentive problem. The landlord pays for the system. The tenant benefits from reduced bills and any feed-in tariff income. In most states, you cannot structure a standard residential lease to redirect feed-in tariff income to the landlord without establishing an embedded network, which is a more complex arrangement suited to multi-unit developments rather than typical houses.
For standalone rental properties, accept that the tenant captures the operational savings and focus the financial case on the rebate, depreciation, capital value, and rental market advantages instead. These are real and quantifiable, they simply operate on a different mechanism than the direct savings you would see on your own home.
One practical note: if you retain ownership of an electricity account during a vacancy period, any generation is exported and the feed-in credit goes to you. This is a minor but real benefit during periods between tenancies.
Is solar on a rental property worth it?
It depends on your market, your hold period, and your tax situation. The cases where it makes clear sense:
High-electricity-cost states (SA, NSW)
Tenants place more value on solar where electricity is most expensive. The rental premium and capital value uplift are largest in SA and NSW.
Long-term hold with low vacancy risk
The depreciation deductions compound over time. A 10-year hold on a well-located property makes the depreciation stream meaningful alongside capital value growth.
Properties near the end of a vacancy period
If the property is between tenants and needs a refresh, solar is a relatively cost-effective improvement compared to renovations, with a dual benefit of faster re-letting and capital uplift.
Areas with high tenant solar awareness
Inner-ring suburbs in major capitals, coastal areas, and environmentally aware demographics all show higher solar premium in rental markets.
The cases where it makes less sense: short hold periods where capital value gains have not had time to be realised, regional markets where tenant demand for solar is lower, and situations where the property already has other more pressing capital needs.
If you have tenants already in place and want to understand what solar would mean for their bills before approaching them about the upgrade, our payback calculator can model the savings at their address. If you are ready to get quotes, our comparison service can connect you with installers who regularly work on investment properties.
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The next step
If you have any questions about the information in this guide, feel free to get in touch:
Email: hello@whysolar.com.au
Tel: +61 2 5657 6527
If you're considering solar panels or batteries for your home, Bec and the team can help you get quotes from trusted, pre-vetted local installers:
Written by
Bec RamirezAussie Mum & Energy Expert
Helping families navigate the switch to solar with practical, real-world advice. Bec focuses on the financial side — rebates, bill savings, and financing options — so everyday Australians can see real value from going solar.
Learn more about Bec Ramirez