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A critical analysis of the tax treatment of dealings under Australian domestic emissions reduction and abatement frameworks


In the absence of a national price for carbon, a number of other market-based instruments aimed at incentivising the transition to renewable and cleaner energy have been developed and are now operating in Australia. These include the NSW Greenhouse Gas Reduction Scheme, the Renewable Energy Target and the National Carbon Offset Scheme. The design of the deferred Carbon Pollution Reduction Scheme included specific taxation rules aimed at scheme transactions but these other certificate-based markets have been left to operate under the general taxation rules.

This article provides a detailed technical analysis of the taxation consequences that arise from transactions under the nominated schemes and considers taxpayers who participate in the following ways: those which undertake qualifying activities that give rise to the generation of offsets; those who acquire offsets to meet compliance liabilities; and those who voluntarily seek carbon neutral status. In order to provide a context for this discussion, the article also includes a description of the basic operation of each scheme so that the relevant transactions may be identified. The similarity in design features across the schemes highlights the conclusion that substantially similar taxation issues are raised by each of the schemes. Particular emphasis is placed on forestry offsets and the new Carbon Farming Initiative is also briefly discussed.

Author profiles:

Alexandra Evans CTA
Alex is a PhD candidate, Faculty of Law, University of Sydney, Australia Current at 01 June 2011 Click here to expand/collapse more articles by Alex EVANS.
Celeste Black
Celeste is a Associate Professor, Faculty of Law, University of Sydney, Australia. Current at 01 April 2016 Click here to expand/collapse more articles by Celeste BLACK.
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