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NFF backs carbon and biodiversity credit changes

Sheep Central, March 21, 2022

THE National Farmers’ Federation has welcomed Federal Government changes to treat Australian Carbon Credit Units (ACCUs) and biodiversity credits as farm income.

Minister for Agrciulture David Littleproud today announced the government would make the adjustment to the primary production definition of ACCUs and biodiversity credits.

The Morrison Government said it will apply concessional tax treatment to primary producers that generate revenue from the sale of ACCUs and biodiversity certificates to encourage carbon abatement activities and help Australia deliver on its net zero emissions target by 2050.

The Federal Government estimated the changes will provide farmers with an estimated $100 million benefit through the tax system over the forward estimates.

Under the new tax regime, farmers will treat revenue from the sale of ACCUs as primary production income, providing access to income tax averaging arrangements and the Farm Management Deposit scheme. Revenue from ACCUs will be recognised in the year of sale to support cash flow. The treatment of biodiversity certificates will be aligned with the new tax regime for ACCUs.

Mr Littleproud said the announcement will further encourage carbon abatement and biodiversity activities, while providing primary producers with a diversified source of on-farm income.

“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.

“This is removing barriers for farmers who want to do the right thing by their farm and the changes are expected to deliver $100 million to their bottom line over the next four years,” he said.

NFF chief executive Tony Mahar said the change was due recognition that income related to carbon and biodiversity were part of the farm business. It is also consistent with policy analysis the NFF has progressed under the Australian Agriculture Sustainability Framework (AASF) project.

Mr Mahar said the correction will allow income from these ‘non-traditional’ commodities to receive similar treatment under a farmers’ tax arrangements including income averaging, and access to Farm Management Deposits.

“It is also expected to clarify the timing of bringing the income to account, which is preferred to be when it is priced, not before.”

Mr Mahar said the future of agriculture would likely be a dynamic farm system of multipurpose landscapes where traditional commodities like food and fibre contributed with maintained or improved attributes from carbon sequestration, biodiversity and other natural capital systems.

The NFF continues to work on the development of the AASF which includes exploring a range of tax and other policy measures needed to make agriculture’s role in sustainability identifiable, credible and participatory in a fit for purpose legislative environment.

“The NFF’s Roadmap for $100 billion in farm gate return by 2030 includes a goal for five per cent of farmers’ income to come from natural capital by the same year. Today’s change supports this goal.”

The AASF is designed to promote the broad sustainability characteristics of Australian agriculture. It includes three principal areas of focus: 1) better evidence base to our critical international markets 2) increased transparency for Environment Social and Governance (ESG) priorities of the corporate, especially value chain participants, and 3) greater demonstration of sustainability attributes to satisfy the increasing appetite of international capital markets on inherent risks to their book.

The AASF also seeks to develop national scale data sets to inform its 45 identified sustainability criteria. Programs such as Agforce’s AgCarE and the MacDoch Foundation’s Farming for the Future initiative will greatly assist in developing credible data sets, the NFF said.

Mr Mahar said he understood the change would be implemented through primary legislation and acknowledged the leadership of Minister Littleproud and his colleagues in getting it to this point.

“Farmers should expect the legislation be supported unfettered to pass Parliament.”

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