Emissions trading scheme and Negotiated Greenhouse Agreements

(Clause 21)

Summary of proposed amendment

Legislation is being amended so that the accrual income rules apply when a party to a Negotiated Greenhouse Agreement (NGA) receives emissions units in relation to the impact of the Emissions Trading Scheme (ETS) on the price of inputs.

Application date

The amendment will apply from 1 July 2010.

Key features

Section ED 1B of the Income Tax Act 2007 treats the entitlement to receive emissions units from the Crown under the ETS industrial allocation process as giving rise to income on an accrual basis. This amendment completes the extension of that accrual basis to parties to a NGA who receive emissions units in recognition of the impact of the ETS on the price of their inputs.

Background

NGAs were entered into between the Government and two businesses some years before the introduction of the ETS. Arrangements have subsequently been agreed between these emitters and the Crown under which the Crown will transfer emissions units to these businesses in recognition of the impact of the ETS on the price of their inputs.

An earlier amendment was made to section ED 1B to deal with this issue, but was not wide enough to cover the procedure subsequently negotiated with another of the NGA parties.