At SolarQuotes, we constantly get applications from solar companies across Australia hoping to join our network.
Today we received a promising application from New South Wales. It was a 3 month-old company, founded by two experienced installers. The installers had been operating as sole traders for many years and had decided to take the next step: forming a company. They had a website up and running and were out selling and installing solar, trading as the new company. They appeared to have lots of happy customers.
But I quickly spotted a showstopper of a problem with their application…
Close to the top of the (annoyingly long) SolarQuotes installer application form it asks for the entity’s electrical contracting licence. The installers had entered their two individual contractors licences but did not have an electrical contractors licence for the new company.
In NSW, a company is simply not allowed to sell solar under any electrical contractors licence other than the company’s.
So if the contract to sell solar was through the new company, they had been selling without the proper licence.
We advised the applicant of this and I expect they’ll get licensed up ASAP. They can reapply under the company licence and we’ll continue with our full vetting procedure.
We are finding that this situation happens all too often. Nine times out of ten the company is simply unaware of the rules surrounding electrical contracting and companies, and there is a happy ending. Occasionally they haven’t got a licence because they don’t care about such technicalities, and those companies are placed on the infamous (and very long) SolarQuotes Blacklist™. It’s a list we’ve been compiling for 10 years.
At SolarQuotes, the last thing we want to do is refer a customer to a solar company that is not properly licensed; so we have to be aware of the rules for all states and territories. This blog post explains – to the best of my knowledge – exactly what licences are required to sell solar power and which entities need them in each state or territory.
But before I get into the nuts and bolts of licensing and business entities, I’ll first go through the types of business entities that can operate in Australia. That’s the starting point for everything and I’ve learned many consumers (and a few young players in the solar industry) can find it all a bit confusing.
What Types Of Business Entities Can Become A Solar Company?
If you (legally) buy solar in Australia it will almost certainly be from one of the following business entities:
- Sole trader: an individual operating as the sole person legally responsible for all aspects of the business.
- Partnership: an association of people or entities running a business together but not as a company.
- Company: a legal entity separate from its shareholders.1
- A Trust: an entity that holds property or income for the benefit of others.
All these entities must have an active Australian Business Number (ABN) to do business.
A company must also have an Australian Company Number (ACN).
Trusts are more complex. A trust will have an associated ACN if its trustee is a company. (A trustee is the legal entity and conducts trade for the trust). Trusts are usually set up to efficiently spread profits between multiple beneficiaries. In other words they are a legal way to minimise the tax paid on profits. (Disclosure: SolarQuotes is operated by a trust).
On the review pages of all SolarQuotes installers (i.e., those within our network) you’ll see we provide each installer’s:
- Business Entity Type (if not a company),
- Registration date,
- ACN (if applicable), and…
- link to their ABN and ACN registration pages on ASIC.
This information is updated every 24 hours via a direct link to the Australian Securities & Investment Commission (ASIC)2. The result is that on SolarQuotes, any consumer browsing reviews of solar installers in our network can see exactly the type of business entity they are dealing with, and their ASIC details are verified and active.
But does it matter what kind of entity a solar company is?
In many states, the type of electrical contractor’s licence required to legally sell solar can depend on the type of entity doing the selling.
So let’s look at each entity in detail.
Some people look down on sole traders. That’s ridiculous. The classic story-arc for many a tradesperson is:
- The enterprising tradie wants to work for him or herself. So they register as a sole trader. Registering as a sole trader is free and easy.
- As the sole trader business grows, his accountant starts to get nervous. Why? Because the person operating as a sole trader has sole responsibility for everything. If something goes horribly wrong – the sole trader can be sued and there is no limit to his or her liability. Insurance is an important protection here, but it won’t cover all eventualities.
- As the business gets more profitable, the accountant also has limited options to minimise the sole trader’s tax bill – as all profits are taxed as individual income.
- So the accountant advises the growing sole trader to spend a few thousand bucks registering a ‘Pty Ltd’ company.
Many of the most successful and best-loved companies who we refer through SolarQuotes were sole traders when they started with us – some have since become companies and some still tick happily along as a sole trader.
When you deal with a sole trader you often deal with the business owner. Often the salesperson, installer and administration are one and the same person (although sole traders can employ people), so you can expect very personal service and total accountability. Also, as mentioned above, the sole trader has full liability if something goes wrong – so he or she really does have ‘skin in the game’. Their reputation, licence and bank balance are on the line.
If Fred Smith the sole trader doesn’t want to advertise as “Fred Smith“, he can register a business name to the sole trader. For example: “Fred’s Whiz Bang Solar” could be the business name of the sole trader that is Fred Smith.
But if you buy solar from the sole trader, “Fred’s Whiz Bang Solar” which is operated by Fred Smith, your contract is with Fred Smith the person, not “Fred’s Whiz Bang Solar” – because the latter is just a business name.
Fred Smith the person has the responsibility to be licensed, deliver what was promised, and to honour all warranties.
To summarise: a sole trader is a legitimate business – but it is not a company. It offers a cheap and low paperwork business structure. A sole trader is a business entity that is controlled by a single person and must have an ABN.
A partnership can be thought of like a sole-trader style business, but with two or more people running it and responsible for it. It is a simple, low overhead way for multiple people to run a small/medium business.
Each state and territory has a different law or “Partnership Act”, but generally the responsibilities are as per a solar trader – except instead of the contract to buy solar being with one person it is with all the partners equally.
A partnership must have an ABN.
A company is a business that is controlled by its directors and owned by its shareholders3. Profits are owned by the company and it must comply with the Corporations Act 2001. Almost all small/medium companies you deal with in the solar industry will be “Proprietary Limited” and have the “Pty Ltd” suffix.
A company may have a business name that is different from its company name. For example, SolarQuotes is the registered business name of Peacock Media Group Pty Ltd.
If you buy solar from a person called Fred Smith who works for the company Fred’s Electrical and Contracting Pty Ltd, which owns the business name “Fred’s Solar“, the contract is with “Fred’s Electrical and Contracting Pty Ltd Trading As Fred’s Solar“. It is Fred’s Electrical and Contracting Pty Ltd‘s responsibility to be licensed, deliver what was promised, and to honour all warranties.
A company must have an ACN and an ABN.
Trusts can be complex and hard to understand corporate beasts. Some people think trusts are blatant tax dodges. I think they are a perfectly legitimate way to structure a business, protect assets and share profits with multiple people or entities. But, as I already disclosed, the company that operates SolarQuotes is a trustee so I guess I would say that!
If you buy solar from a trust, you are technically dealing with the trustee (the entity that operates the trust). The trustee could be a company or a sole trader or a partnership. Most often the trustee is a company (with an ACN). That’s because businesses that have grown into trusts generally have the larger profits to cover the extra admin and legal costs of having a trust. Trusts are also commonly used in family businesses.
If you buy solar from a trust, you are entering in to a contract with either the company or individual that is the trustee. When you look at the registered entity name (as shown on all SolarQuotes clients review pages) it name will be along the lines of: “Fred’s Electrical and Contracting Pty Ltd ATF The Smith Family Trust“. ATF means “As Trustee For”.
To add to the confusion, trustees can also have business names. So while a solar company may have the business name “Fred’s Solar“, technically you are dealing with “Fred’s Electrical and Contracting Pty Ltd Trading As Fred’s Solar ATF The Smith Family Trust“.
It is the trustee’s responsibility to be licensed, deliver what was promised, and to honour all warranties.
Trusts must have an ABN. The trustee must have an ACN if it is a company.
How Entity Type Affects Licensing Requirements for Selling Solar
This is where things get interesting – and where (usually well-meaning) solar companies as well as consumers can get caught out.
In the 10 years I’ve been running SolarQuotes, one thing I’ve seen cause lots of confusion among installers, business owners, customers, and even peak industry bodies is the licensing requirements for different business entities.
The confusion stems from the fact that:
- an Electrical Licence may be for either a person or a business entity or, sometimes both.
- the licensing rules depend on which state/territory you are in, and can be very different.
- sole traders/partnerships are fundamentally different entities to a company.
- the written legislation I’ve read is ambiguous.
And as I’ve already said, here at SolarQuotes we never want to refer a company that is not properly licensed.
To try to get it right we paid for formal legal advice on what licences are needed across Australia by each entity type to sell solar. But even after that it wasn’t clear. So we have followed up with advice from the electrical regulator in each state/territory.
We are confident we now definitively understand the licensing requirements across Australia and I’m happy to share this hard-won knowledge, as I’m unaware of any web site that has this information all in one place.
Also, just like the example application in the introduction to this post (which really did arrive today!), we’ve had applications from plenty of otherwise fantastic solar installation companies that have unwittingly not been properly licensed to sell solar in each state they operate in4. Most of these companies have been happy to get all the required licences once they realise the law5.
Licensing For Solar Retailers In Australia
Note: as mentioned above – these rules have been determined by a combination of formal legal advice and informal conversations/emails with each state/territory regulator. If there were definitive online links to legislation to back all these requirements up, I’d link to them – but in most cases there are not. We are relying on the interpretation of the laws by the bodies that enforce them – as told to us. I think this is why a summary like this does not exist anywhere on the internet – as far as I can tell.
If you disagree with anything below, when commenting please provide evidence of your claims, then we can actually sit down and work out who is correct.
NSW, ACT, NT:
In New South Wales, the ACT and Northern Territory, entities cannot sell solar without their own Electrical Contractors Licence in the state or territory where the work is performed. They cannot rely on a subcontractor’s ECL.
Sole Traders: The person who is the sole trader must have an Electrical Contractors Licence to sell solar.
For example: if Fred Smith is a sole trader, he can only sell (i.e contract for) solar under his personal ECL.
Companies: The company must have an Electrical Contractors Licence (ECL) to sell solar. The ECL must be in the company’s name.
A company selling solar in NSW, ACT or NT cannot rely on an individual person’s ECL. A company selling solar cannot rely on a subcontracted entity’s ECL.
For example Fred Smith, who owns and operates Fred’s Solar & Electrical Pty Ltd, cannot sell solar through that company using his personal ECL. Also Fred’s Solar & Electrical Pty Ltd cannot rely on the subcontractor Jim’s Installations Pty Ltd’s ECL. Fred must have an ECL in the name of Fred’s Solar & Electrical Pty Ltd.
This is a really important distinction. There are a few companies in NSW, NT and ACT who are relying on individual peoples’ ECLs and/or subcontractor companies’ ECLs to sell solar with. They can’t do that and are putting their customers and companies at risk by doing so.
When sole traders become companies
At risk of labouring the point, it is not uncommon for us to talk with well-meaning sole traders in NSW, NT or ACT who have recently started a company to continue selling solar but have not realised their ECL needs to be upgraded to be a company ECL. This is usually because the accountant that sets up the company for them is unfamiliar with electrical licensing. (Often the accountant is too focused on minimising tax to even consider it.)
Partnerships: In NSW, ACT and NT, as far as I can ascertain, a partnership is treated like a company when it comes to Electrical Licensing.
To the best of my knowledge, the partnership must have an Electrical Contractors Licence (ECL) to sell solar and the ECL must be in the partnership’s name.
In SA you cannot sell solar without an SA Electrical Contractors Licence (Or Builders Licence with Solar Endorsement). The ECL or Builders Licence must be in the name of the entity that is selling the solar.
If the installation includes structural building work, the company must hold a building work contractors licence and the work must be supervised by a registered building supervisor.
Licensing for Sole Traders: The person who is the Sole Trader must have an Electrical Contractors Licence (Or Builders Licence with Solar Endorsement) to sell solar in SA.
Licensing for Companies: The company must have an Electrical Contractors Licence (ECL) (Or Builders Licence with Solar Endorsement) to sell solar. The ECL or Builders Licence must be in the company’s name.
Licensing for Partnerships: Just as with a company, the partnership must have an Electrical Contractors Licence (ECL) (Or Builders Licence with Solar Endorsement) to sell solar. The ECL or Builders Licence must be in the partnership’s name.
A company selling solar in SA cannot rely on an individual person’s ECL or Builders Licence. A company selling solar in SA cannot rely on a subcontracted entity’s ECL or Builders Licence.
Victoria and Western Australia
In Victoria and WA an entity selling solar does not need to have its own electrical contractors licence if it subcontracts the installation to an entity that has an electrical contractors licence.
So in VIC and WA you can and do have ‘sales companies’ without ECLs who sell the solar, which then gets subcontracted out to properly licensed sub-contractors.
Many solar installers in VIC and WA are frustrated by this as it lowers the barrier to entry to companies who want to sell solar. Personally I’d prefer it if these states joined NSW, ACT, NT and SA and insisted that any entity that sells solar must have its own ECL.
As an aside: I’ve heard from a number of Victorian installers who think that requiring sales companies to have an ECL will solve the problem of crap solar companies selling crap solar power systems. It won’t. In NSW, ACT, NT and SA companies have to have their own ECL and there is still plenty of crap solar.
For companies and sole traders, the rules for selling solar in QLD are the same as for VIC and WA. The entity does not need its own ECL to sell solar in QLD. It can rely on a subcontractors’ ECL.
Where Queensland differs to every other state or territory is how it treats partnerships. Here’s what the Queensland Building & Construction Commission says about partnerships:
Unlike a company, a partnership is not recognised as a separate legal entity and can’t be licensed.
For a partnership in QLD to install solar, at least one of the partners or an employee of the partnership must hold an electrical contractors licence. As far as I can tell, a partnership in QLD does not need a licensed partner or employee to sell solar, as long as it subcontracts the install out to a properly licensed subcontractor.
Any business selling solar in Tasmania either has to have a Tasmanian ECL or must subcontract the work out to an entity with a Tasmanian ECL. The bit that appears to be unique to Tassie is that all paperwork involved in the sale and installation needs to name the licensed entity.
So an entity can sell solar in TAS without its own ECL – but it must name the licensed contractor on all quotes, contracts and other paperwork. A sales company in Tasmania cannot sell solar to a customer, and then go out and find a contractor to do the installation. The subcontractor must be nominated before the sale is made – and must not change after the sale.
So, according to our research and the advice we’ve received, those are the rules. Mostly they are not clearly spelled out anywhere. Not where we’ve looked anyway. So I hope this article helps Australian consumers buy solar power systems with confidence and installers sell with confidence.
SolarQuotes Reviews Will Soon Include Verified, Up To Date Electrical Licences
Over the next few weeks we will be rolling out Electrical Licensing information on all reviews pages of SQ clients.
Where the state or territory has a 21st century IT system that can give real-time feedback of the licensing details (i.e NSW and QLD), we’ll be updating the licence information automatically from the horse’s mouth. Or from the regulators’ API6 to be technically correct. For everywhere else we’ll have licensing information that is as up to date as possible using regular, manual checking.
This will allow any potential buyer to double check the licence of an installer they are considering. They can see if the company has its own licence or (where allowed) whether it relies on a subcontractor.
To be honest, I don’t expect many solar buyers to go to that level of due diligence, but hopefully it will help build trust in the industry by adding a little bit more transparency to a very confusing system.
- Small companies are usually privately owned by a small number of shareholders or — despite the name — a single shareholder. Large companies may be publicly traded on the share market and owned by potentially hundreds of thousands of shareholders. These shareholders generally have no involvement with the company other than owning a small part of it. ↩
- We had to jump through some serious hoops to get permission to use that link. ↩
- Note a private company can have a single shareholder. This may seem strange, as one person owning everything is not what we normally associate with the word “share”, but it is common for small, privately owned companies. ↩
- This included some retailers that had already been ‘approved’ by other organisations ↩
- And sadly a few have said they don’t need the licences and we don’t know what we are talking about – they may be ‘approved’ to be ‘retailers’ elsewhere – but not on SolarQuotes ↩
- Applications Program Interface. This can allow a website to automatically update with real time information. ↩