Australia: Australian repeal of the Carbon Tax - easy come, easy go?

Tax Update (Australia)
Last Updated: 31 October 2013
Article by James Newnham

On 15 October 2013, the recently elected Federal Government released a Consultation Paper and exposure draft legislation to repeal the carbon pricing mechanism, otherwise known as the Carbon Tax.

The Government announced that the Carbon Tax will be repealed effective from 1 July 2014 even if the carbon tax repeal legislation is passed after that date. As the repeal legislation needs to be passed by both the House of Representatives and Senate, the Government will need the support of other parties as the Government does not currently have a majority in the Senate. Recent developments have indicated that this may be achievable before 1 July 2014.

Further details of the Direct Action Plan, which is the Government's preferred method to reduce pollution, will be developed through the release of a white paper and subsequent consultation process.

Consultation Paper

The Consultation Paper summarises the following key changes:

  • The carbon tax will be abolished effective from 1 July 2014.
  • Entities must comply with current carbon tax liabilities, compliance and reporting arrangements up to 30 June 2014 under the carbon pricing mechanism, the fuel tax credits system, excise or excise–equivalent customs duties, or synthetic greenhouse gas levies.
  • The Australian Competition & Consumer Commission will have new powers to monitor prices and take action against businesses that attempt to exploit other businesses and consumers by charging unreasonably high prices or making false or misleading claims about the effect of the carbon tax repeal on prices.
  • The personal income tax cuts which were legislated to commence on 1 July 2014 and the associated amendments to the low–income tax offset will be repealed.
  • Industry assistance provided under the Jobs & Competitiveness Program ("JCP") and the Energy Security Fund will continue in 2013-14 for the purpose of meeting carbon tax liabilities.
  • The Climate Change Authority will be abolished.

The purpose of the consultation process is to:

  • Identify any technical issues with the draft carbon tax repeal bills; and
  • Manage transitional issues for liable businesses and other entities.

Submissions on the draft carbon tax repeal bills are due by 5 pm on Monday, 4 November 2013.

Proposed amendments to the tax legislation

The following sections deal with the Australian income tax and GST implications arising from the proposed legislation.

Part 2 of Schedule 1 of the exposure draft Clean Energy Legislation (Carbon Tax Repeal) Bill 2013 contains amendments to the following:

  • Income Tax Assessment Act 1997; and
  • Taxation Administration Act 1953.

Generally, the amendments remove references to a "carbon unit" and "international emissions unit" principally from Division 420 and other related provisions of the Income Tax Assessment Act 1997 and Taxation Administration Act 1953. Further, the provision stating that the unit shortfall charge is not deductible will also be repealed. On this basis, Division 420 continues to operate in respect of Australian carbon credit units ("ACCUs") and Kyoto units.

Income tax implications

  • As we are in the fixed charge years, liable entities are unlikely to be holding carbon units or international emissions units. This is because carbon units are automatically surrendered when acquired from the regulator and the international units could not offset liabilities in the fixed charge years (refer sections. 100(7)and 122(8) of the Clean Energy Act). Accordingly, the repeal of the tax provisions relating to these units should not itself give rise to any significant Australian tax consequences.
  • In relation to the liabilities arising for the year ending 30 June 2014, the system will 'stay open' to allow entities to acquire carbon units to satisfy their 30 June 2014 obligations (which, generally, last up until 2 February 2015 as 1 February 2015 is a Sunday).
  • The Government has also proposed a number of transitional provisions to wind up the carbon tax scheme. The key transitional provisions which may have tax implications are summarised as follows:
    • Refunds will be paid to an entity for any carbon units auctioned by the Regulator which the Regulator is required to cancel. Any amounts refunded should be assessable to the entity.
    • The Regulator must cancel any carbon units in an entity's Registry account after the final compliance date (currently proposed to be 9 February 2014). Whether the entity is required to include an amount in assessable income depends on if the entity is "entitled to receive" an amount in respect of the cancellation of the carbon units. This depends upon whether the unit is a carbon unit (and is immediately surrendered and therefore will not be in the entity's registry account) or is another unit at that time. It seems that the Government is of the view that the entity is not "entitled to receive" an amount on cancellation of a carbon unit and therefore, no amount should be assessable to the entity.
  • A number of unresolved tax issues which arose when the scheme started, are also relevant as a result of the repeal of this legislation, including:
  • Same business test – whether the same business is carried on where the entity has stopped participating in the carbon tax regime.
  • Thin capitalisation – the likely impact on balance sheets as a result of the repeal of the scheme, especially relevant for entities that are part of the JCP incentive process.
  • Timing – issues relating to the timing of the repeal and especially where the repeal occurs retrospectively (e.g. in relation to deductions, assessable income and treatment of credits where the scheme is repealed after 1 July 2014).

GST Implications

  • At present, the supply of an "eligible emission unit" is a GST–free supply and not subject to GST. The definition of an "eligible emission unit" will be amended, with effect from 1 July 2014, to exclude carbon units. Consequently, the supply of carbon units within Australia (by a GST registered supplier) will be a taxable supply after that date.
  • As a transitional measure, a supply of a carbon unit that was issued prior to 1 July 2014 should continue to be GST–free after that date.
  • Entities that may intend to buy or sell carbon units between 1 July 2014, and February 2015, may need to consider the GST implications of those transactions.

Other considerations

Other (non–income tax) considerations should also be taken into account, including:

  • Fuel tax credits – There should be an increase of fuel tax credits from 1 July 2014 as the carbon tax is proposed to be removed from taxable fuels from this date.
  • Mergers and acquisitions due diligence – the proposed repeal of the carbon tax effective from 1 July 2014 creates uncertainty for entities currently participating in this regime. This will impact the value of any carbon tax related units held by these entities.

Direct Action Plan

The Government has stated that it will implement a Direct Action Plan, which is an incentive based policy designed to support emissions reduction activities through:

  • a capped government fund which will purchase "lowest cost abatement" from projects that reduce or avoid greenhouse gas emissions (Emissions Reduction Fund); and
  • the imposition of financial penalties on businesses which exceed their "business as usual" emissions baselines.

The Government intends to commence its Direct Action Plan by 1 July 2014. The terms of reference for the Emission Reduction Fund have been released and can be viewed here:

Submissions in relation to the Emission Reduction Fund are required by 18 November 2013. Further details of the Direct Action Plan will be developed through a white paper and consultation process.

© DLA Piper

This publication is intended as a general overview and discussion of the subjects dealt with. It is not intended to be, and should not used as, a substitute for taking legal advice in any specific situation. DLA Piper Australia will accept no responsibility for any actions taken or not taken on the basis of this publication.

DLA Piper Australia is part of DLA Piper, a global law firm, operating through various separate and distinct legal entities. For further information, please refer to

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions