Australia: Carbon tax - meet imminent deadlines or risk $1.7m penalty

The Coalition recently affirmed its plan to end the carbon tax and enact its Direct Action Plan on climate change and carbon emissions if it wins the federal election in September this year.

At this stage, it is not entirely clear how greenhouse gas emissions will be regulated if the carbon tax is abolished after the election. There is also some uncertainty as to how entities that are now in the process of acquiring and surrendering emissions units will be treated under a new carbon tax system.

Despite this uncertainty surrounding the future of the carbon tax, liable entities should remain vigilant because a failure to comply with current reporting or surrender obligations may result in significant penalties.

In particular, liable entities should be aware of the upcoming deadline of Monday, 17 June 2013 for the reporting of interim emissions numbers and the interim surrender of eligible emissions units.


A liable entity that has an interim emissions number (IEN) for the 2012/2013 financial year must provide a report in relation to its IEN (Interim Report) to the Clean Energy Regulator by Monday, 17 June 2013. The Interim Report must be given in the manner and form approved by the Clean Energy Regulator and set out the information specified by the National Greenhouse and Energy Reporting Regulations 2008 (Cth).

A liable entity that is a "direct emitter" may calculate its IEN by determining either:

  • the amount which is 75% of its total provisional emissions numbers for the 2011/2012 financial year (Safe Harbour Estimate); or
  • a reasonable estimate of 75% of its total provisional emissions numbers for the 2012/2013 financial year (Forward Estimate).

If a liable entity chooses to report its IEN using a Forward Estimate, the Interim Report must include the reasons why the provisional emissions numbers for its facilities from the previous financial year were not used to work out its IEN.

A failure to submit a compliant Interim Report may result in a penalty of $1.7M and an additional penalty of $17,000 per day for each day that a compliant Interim Report has not been provided after the due date.


Liable entities must surrender the number of eligible emissions units which is equal to its IEN by 17 June 2013 or pay a unit shortfall charge of $29.90 per unit (ie. 130% of the fixed charge of $23 per unit).

The unit shortfall charge will apply to the difference between the liable entity's IEN and the number of units surrendered by 17 June 2013 and will be payable five business days after the due date for surrender. A liable entity that fails to pay the unit shortfall charge will also be liable to pay a penalty of 20% per year on the unpaid amount of the unit shortfall charge until paid.

In order to acquire and surrender eligible emissions units, a liable entity will need its own Australian National Registry of Emissions Units (ANREU) account. Liable entities may meet some or all of their liability by purchasing carbon units for $23 per unit through the ANREU.


If a liable entity reports its IEN using a Forward Estimate it may be liable for an estimation error shortfall charge of $29.90 per unit. There is, however, no risk of an estimation error shortfall charge if the IEN is reported using a Safe Harbour Estimate.

The estimation error shortfall charge is applied to the difference between the amount which is 75% of the liable entity's provisional emissions number for the 2012/2013 financial year (which must be reported by 31 October 2013) and its Forward Estimate. The estimation error shortfall charge will be payable five business days after 1 February 2014. However, the Clean Energy Regulator does have a discretionary power to remit the whole or part of an estimation error shortfall charge if it is satisfied that there are circumstances that make it fair and reasonable to disregard some or all of the amount.

The Clean Energy Regulator has recommended that entities adopt a conservative approach to reporting if the Forward Estimate option is adopted in order to minimise the risk of incurring the estimation error shortfall charge.
It is critical that liable entities gather sufficient information to enable accurate reporting of their IEN to reduce the risk of incurring an estimation error shortfall charge.


The Coalition has promised to repeal the carbon tax legislation and enact its Direct Action Plan on climate change and carbon emissions. Under the Coalition's Direct Action Plan an Emissions Reduction Fund will be established to support carbon emissions reduction activities. However, it is unclear how the Coalition's plan will impact on the future regulation of carbon emissions and liable entities that acquire and surrender units in June this year.

Despite this uncertainty, liable entities should continue to comply with their reporting and surrender obligations and seek to minimise their exposure to shortfall charges and penalties where possible.

Deadline Requirement
17 June 2013 Report IEN and surrender units to cover IEN to avoid a unit shortfall charge.
21 June 2013 If not enough units are surrendered to cover IEN, unit shortfall charge will be due and payable and late payment penalties start to accrue.
31 October 2013 Report provisional emissions numbers and emissions number for the 2012/2013 financial year.
1 February 2014 Surrender units to cover emissions number for the 2012/2013 financial year.
1 February 2014 + 5 business days If not enough units are surrendered to cover emissions number or the entity has an estimation error number, unit shortfall charges will be due and payable and late payment penalties start to accrue.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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