Tax Office takes tree line on carbon

• Philip Hopkins
• The Age, June 24, 2008

A NEW Federal Government law that will enable money spent on planting trees as a carbon sink to be a tax deduction is likely to spur investment in carbon sequestration projects.

Taxation changes to allow the carbon sink developments, which were included in the May 2007 federal budget, were passed in the Senate.

The legislation was held over due to last year's federal election.

From July 1, 2007, investors in qualifying forestry carbon sinks can use the horticulture tax arrangements. These will be immediately deductible for the first five years as an incentive to invest in carbon credits.

Andrew Grant, chief executive of CO2 Group, welcomed the changes.

"Previously, if you planted a tree and did not cut it down, you could not claim any deductibility for the expenditure in establishing the forest," he said. "If you cut it down, all of the provisions of the Tax Act were available, but because you did not cut it down, it didn't qualify."

Mr Grant said there had been a huge anomaly because if you planted a tree for Landcare reasons and you were a primary producer, you were able to claim a tax deduction for the capital expenditure.

"It has given carbon sequestration equality with all other aspects of forestry and environmental management — not an advantage, just equality," he said. "For us, it's important because it means the cost of creating the carbon to our client base is now cheaper because they can deduct their capital expenditure. If a big emitter invested in a project, previously, none of those costs were deductible. Now they are."

The changes were revealed only weeks before the release of the Federal Government's green paper on the Australian emissions trading scheme, which is expected to be a big step forward for the carbon sequestration industry.

■Carbon Planet has had its operations and services certified "greenhouse friendly" by the Department of Climate Change. Established in 2000, Carbon Planet provides solutions for businesses to manage greenhouse gas emissions.

http://www.co2australia.com.au