CFI tax implications and ASIC regulations for advisors

Potential CFI participants should be aware of the financial licensing requirements in relation to providing advice about Australian Carbon Credit Units (ACCUs).

DAFF and ASIC have developed a pair of factsheets (for general guidance only) for farmers and land managers, and for advisers and project developers. Click here.

 

Potential CFI participants should also be aware of the possible tax implications before undertaking a project.

This advice should only be used as a guide. For additional advice on individual circumstances, farmers and land managers should contact a professional taxation adviser or the Australian Taxation Office who can provide advice on the tax implications.

In general, the tax implications of CFI projects are consistent with existing arrangements. There are no new tax rules that apply specifically to the CFI projects. However, before engaging in the CFI, potential participants need to consider whether:

 

·           the activity involves a carbon sink forest (environmental planting)

·           the activity constitutes carrying on a business of primary production.

 

Carbon sink forests (environmental plantings)

 

There are specific tax rules for capital expenditure on CFI projects that are carbon sink forests (environmental plantings). Under current tax laws, the establishment costs of carbon sink forests can be written off at a rate of seven per cent per annum over a period of 14 years and 105 days.

 

More information on the tax rules for carbon sink forests is available here.

 

Is your carbon farming project defined as primary production for tax purposes?

 

A number of special tax concessions are available to primary production businesses. Click here.

 

Non primary production income

 

There are tax implications for primary production businesses if income from the sale of CFI offset units is considered to be non primary production income, including:

 

·         Non primary production income can affect farm management deposit (FMD) eligibility. Once a farmer exceeds $65 000 in off-farm income, they are not eligible to use a FMD account.

 

·         Non primary production income can also affect income tax averaging. Off-farm income over $10 000 cannot be included.

 

More information is available here.

 

 

Council Rates and Land Tax

 

In most circumstances, undertaking a CFI project will not change council rates or land tax paid on a property. However, council rates or land tax may change when land is used primarily for the purpose of carbon sequestration.

 

Parties interested in developing a CFI project should contact their local council or the state government office responsible for administering land tax for more information.

 

Acknowledgement: Australian Dept of Agriculture, Fisheries and Forestry - CFI e-Newsletter November 2012.