Australian farmers will be $100m better off over the next four years as part of a major tax break announced on Monday on the proviso they do their bit to reduce the country’s carbon emissions.
As part of the new tax regimen in keeping with the government’s promise of reaching net zero by 2050 through “technology, not taxes”, farmers will be able to treat revenue from the sale of Australian carbon credit units (ACCU) – worth one tonne of carbon emissions reduced or avoided – as primary production income.
While the government currently pays $12 per unit, in the wake of the Glasgow COP26 climate conference the price per ACCU has surged more than 200 per cent to a high of $55.
As part of the change, companies contracted to supply the units to the government can now trade them on the open market while also enabling farmers to have access to income tax averaging arrangements and the Farm Management Deposit Scheme.
The tax changes will provide farmers with an estimated $100m benefit over the forward estimates and will also encourage carbon abatement activities and help the country reach net zero by 2050.
Revenue from ACCUs won’t be taxed until the year of sale to support cash flow, and the treatment of biodiversity certificates will be aligned with the new ACCU tax regimen.
The Morrison government say it’s the latest step in their plan to introduce incentives for a private sector-led economic recovery that targets higher value-add activities to deliver productivity growth.
In the pre-budget announcement, the government took aim at Labor’s alternative – their proposed safeguard mechanism carbon tax, which the government says would increase the cost of running energy-intensive businesses.
Agriculture Minister David Littleproud said the government’s tax changes would encourage primary producers to diversify their on-farm income sources.
“We want to give genuine farmers more options when deciding to hold or sell their credits – whether for investment purposes or to enhance the environmental credentials of their operations – without being penalised,” Mr Littleproud said.
“This is removing barriers for farmers who want to do the right thing by their farm.”
Energy Minister Angus Taylor said the new scheme was a way for farmers to be rewarded for bringing down emissions.
“The new tax changes means farmers will get an even greater benefit from the income they earn selling the credit units,” Mr Taylor said.
The government has also announced a $60m commitment to funding plastic recycling technology that will target problematic plastics like chip packets.