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Inland Revenue

Tax Policy

Emissions trading scheme and certain Treaty of Waitangi settlements

(Clause 88)

Summary of proposed amendment

Legislation is being amended to ensure that transactions in emissions units which are transferred through certain entities as part of Treaty settlements still give rise to exempt income.

Application date

The amendment will apply from 9 June 2009 which is just prior to the date any pre-1990 forest land emissions units were allocated to any relevant entities.

Key features

When pre-1990 forest land emissions units are disposed of, the income which arises is treated as exempt income under section CX 51B of the Income Tax Act 2007. This amendment extends the definition of pre-1990 forest land emissions units in section YA 1 so that units which are received by an iwi from a representative entity as part of a Treaty settlement process fall within the definition. This will ensure that the disposal proceeds received by that iwi are also treated as exempt income.


A one-off allocation of emissions units is made by the government to owners of pre-1990 forestry land to compensate them for the additional costs that will arise as a result of the Emissions Trading Scheme if they change the use of their land. For owners who hold the land on capital account, the disposal of these units is treated as giving rise to exempt income. Ordinary rules apply to any subsequent transactions in those units.

Some Treaty of Waitangi settlements which involve forestry land are being implemented in two stages. The land and other assets are initially transferred by the Crown to an entity which represents a number of iwi, and that representative entity will subsequently transfer those assets to the iwi it represents.