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As Australia’s renewable energy market matures, long-term bundled Power Purchase Agreements (PPAs) are becoming a key tool for financing projects and managing price and sustainability commitments. However, when green products such as LGCs are bundled with a Contract for Difference (CfD), the GST consequences can be significant and, in some cases, front-loaded into a single BAS period. 

Australia’s renewable energy sector continues to expand, and corporate offtakers are increasingly using long term Power Purchase Agreements (“PPAs”) to manage energy pricing and meet sustainability targets. For generators, PPAs can provide critical revenue certainty and support project finance.

However, bundled PPAs can create a material GST timing issue one that can crystallise into a large, unexpected liability in a single BAS period if the contract is structured in the standard “bundled” way.

The ATO has recently published guidance (updated 11 December 2025) on bundled PPAs, confirming that green products supplied under a bundled arrangement can give rise to upfront GST attribution where the consideration is the offtaker’s entry into the Contract for Difference (“CfD”). 

If you are negotiating or operating under a bundled PPA, this issue should be addressed early.

What is a bundled PPA (BPPA)?

In the ATO’s description of these arrangements, a PPA typically operates through a CfD that hedges price volatility by settling the difference between a fixed price and the floating market price. The ATO also notes that PPAs commonly do not involve the actual sale of electricity; instead, the offtaker receives electricity via its retailer and the PPA operates as a financial arrangement through the CfD. 

A bundled PPA is one where the generator “bundles up”:

• the supply of entry into the CfD; and

• the supply of green products (such as Large-Scale Generation Certificates (“LGCs”),

in return for the offtaker entering into the CfD. 

The commercial pricing often appears as a single bundled rate, with no separately stated cash price for the LGCs. That structural feature is typically where the GST timing risk arises.

Two supplies, two different GST outcomes

The ATO’s published BPPA guidance treats the standard bundled arrangement it has reviewed as giving rise to two distinct supplies: 

1. The CfD (derivative) - input taxed financial supply

   The ATO states that, in the BPPAs it has considered, the generator supplies a derivative when it enters into the CfD and the offtaker supplies a corresponding derivative when it enters into the CfD. The ATO also states that the supply of a derivative is an input taxed financial supply.

   This aligns with GSTD 2005/3, which confirms that contracts for difference are financial supplies when the relevant requirements are met.  

2. The LGC (green products) transfer - taxable supply

The ATO states that the supply of green products under the BPPAs it has considered is a taxable supply where the generator and offtaker are located in Australia. 

The practical takeaway is that the CfD component can be input taxed, while the green products component can be taxable so the GST analysis turns heavily on what constitutes consideration for the green products and when that consideration is provided. 

Why GST can become payable upfront

In the BPPAs the ATO has considered, the ATO states that the consideration for the taxable supply of green products is non monetary consideration, being the offtaker’s initial entry into the CfD. 

This matters because GST attribution is driven by the timing of consideration (and invoicing). Where the consideration is non monetary and is provided upfront (at contract effectiveness / CfD entry), the GST on the green products can be brought forward into a single tax period rather than being spread across the years in which LGCs are generated and transferred. 

The valuation challenge

If GST is attributed upfront, the next question is: what value is used for the green products stream?

The ATO’s BPPA guidance includes a dedicated section on valuation of non monetary consideration, recognising that the green products may be transferred progressively over a long term (often 10–15 years) while the consideration is provided upfront under the standard bundled structure described.

In practice, defensible approaches commonly rely on:

• a DCF methodology using forecast volumes and observable price inputs; and/or

• benchmarking to available market pricing indicators at the effective date; and/or

• independent valuation support where the values are material.

The key risk is not the use of a particular model, but whether the valuation is supportable and contemporaneously documented (including assumptions, sources, and calculations) to withstand ATO review.

What you should do

If you are negotiating a new bundled PPA

• Treat GST as a drafting issue, not a compliance afterthought. Ensure the agreement contemplates the GST outcome that may arise where entry into the CfD is the non monetary consideration for green products. 

• Document the valuation methodology at the effective date and retain workpapers supporting assumptions and inputs. 

• Plan cash flow and invoicing mechanics so that any upfront GST and corresponding ITC timing are operationally manageable.

If you have an existing bundled PPA

• Run a GST diagnostic to confirm whether the arrangement aligns with the standard bundled structure described by the ATO and whether GST has been treated consistently with that analysis. 

• Where contract terms or conditions precedent complicate attribution outcomes, consider whether a Commissioner determination may be relevant under section 29 25 (depending on facts), noting the Commissioner’s power to determine attribution rules in specified circumstances. 

• If a material exposure is identified, consider the appropriate engagement approach (including voluntary disclosure strategy and/or seeking ATO guidance). 

Bottom line

Bundled PPAs can produce a front loaded GST outcome on green products in the standard arrangement described by the ATO, because the consideration for those green products is treated as the offtaker’s entry into the CfD (non monetary consideration). 

These risks are manageable with proactive structuring, clear GST clauses, and robust valuation support. The cost of addressing GST at the contracting stage is typically far lower than attempting to correct treatment after the fact.
If you have a bundled PPA under negotiation or currently on foot, now is the time to review the GST position.

Quick summary - contract features that can signal an upfront GST issue

• The agreement is a bundled PPA where the generator “bundles up” the supply of entry into the CfD with the supply of green products, in return for the offtaker entering into the CfD.

• There is no separately identified cash consideration for LGCs/green products (i.e., no clear $/LGC price stream) and the commercial economics are primarily expressed through the CfD framework.

• The contract is structured so the consideration for green products is non monetary (the offtaker’s initial entry into the CfD), which the ATO describes as being received upfront in the BPPAs it has considered.

• The contract contains conditions precedent (e.g., financial close / CP satisfaction or waiver) that determine when the arrangement is “entered into”  because the ATO states attribution can occur when the agreement is entered into or when CPs are satisfied/waived (in the fact pattern considered).

• Green products are transferred over a long term (often 10–15 years), but the ATO notes that where consideration is received upfront, GST can be attributed upfront even though certificates are transferred progressively.

• Clauses that focus on the timing of certificate transfers or periodic invoicing do not, on their own, determine attribution where the ATO’s “upfront non monetary consideration” analysis applies.

• The contract includes (or should include) a robust valuation mechanism for green products (because valuing green products over the contract term may be required; the ATO references GSTR 2001/6 and notes valuation complexity).

WLM can help

If you are negotiating, refinancing or operating a bundled PPA, now is the right time to test your GST position before a large, unexpected liability lands in a single BAS.

At WLM Accounting, our team can review your contracts, model potential GST outcomes and work with you and your advisors to structure arrangements that are commercially robust and tax-efficient.

If you’d like to review your current position or discuss how to manage tax risks, reach out to WLM today.