THE Federal Government has this week passed legislation making tax changes to allow Australian Carbon Credit Units to be classified as farm income.

The bill will allow primary producers to use carbon income in Farm Management Deposits and only tax carbon credits at the point of sale – previously holders of ACCUs were taxed based on changes in the value each year.

Former agriculture minister David Littleproud made the proposal to classify credits as farm income before the Coalition was voted out of Government. It was welcomed by both the agriculture and carbon industries at the time.

In the second reading of the bill, minister for financial services Stephen Jones said the tax changes will help producers diversify their incomes.

“The bill also assists our primary producers to reduce their carbon emissions,” Mr Jones said.

“These changes will allow more primary producers to access income-averaging schemes that help to distribute uneven income across multiple financial years, and reduce their tax liabilities. Doing so will support primary producers to diversify their businesses into carbon abatement activities.”

The bill says the law will apply to most of the common agreements between carbon service providers and landholders.

“An eligible primary producer may enter an arrangement with a carbon service provider to undertake carbon abatement activities, which results in the carbon service provider being issued ACCUs.

“The proceeds that the primary producer receives from the carbon service provider as part of this arrangement, whether it be a regular payment or proceeds from the sale of the ACCUs, are considered assessable primary production income.

“Furthermore, if the carbon service provider provides the primary producer with ACCUs directly as part of their commercial agreement, these ACCUs (and proceeds from the sale of these Australian carbon credit units) are also considered assessable primary production income.”

One of the main omissions from the tax concessions is when land is leased for a carbon project, it will be included as property income rather than primary production income.