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Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009 [No. 2]

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2008-2009

 

THE PARLIAMENT OF THE COMMONWEALTH OF AUSTRALIA

 

 

 

SENATE

 

 

 

carbon pollution reduction scheme (consequential amendments) bill 2009

 

 

 

 

SUPPLEMENTARY EXPLANATORY MEMORANDUM

 

Amendments to be moved on behalf of the Government

 

 

 

 

 

(Circulated by the authority of the Minister for

Climate Change and Water, Senator the Honourable Penny Wong)

 



T able of contents

Glossary.............................................................................................................. 1

General outline................................................................................................. 3

 Chapter 1              Transitional arrangements for the Authority................... 5

 Chapter 2              Coal mining.......................................................................... 9

 Chapter 3              Domestic offsets................................................................ 11

 Chapter 4          Agricultural emissions....................................................... 13

Index................................................................................................................. 15

 

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The following abbreviations and acronyms are used throughout this explanatory memorandum.

Abbreviation

Definition

The main bill

Carbon Pollution Reduction Scheme Bill 2009

ACCRA bill

Australian Climate Change Regulatory Authority Bill 2009

Authority

Australian Climate Change Regulatory Authority

AWA

Australian Workplace Agreement

The consequential amendments bill

Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009

DCC

Department of Climate Change

GEDO

Greenhouse and Energy Data Officer

ORER

Office of the Renewable Energy Regulator

The Scheme

The Carbon Pollution Reduction Scheme

SES

Senior Executive Scheme



Amendment of the Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009

Transitional arrangements for the Authority

In order to assist a smooth transfer of staff to the new Authority, it is proposed that staff transferring from the Office of the Renewable Energy Regulator or the Department of Climate Change start their employment on the same terms and conditions as they had prior to transfer.  Some technical amendments relating to the transition to the Authority are also proposed.

Tax treatment of free emissions units

The amendments to the main bill provide for Australian emissions units to be issued to coal mining and offset projects.  Consequential amendments clarify the income tax treatment of those emissions units. 

Exclusion of agriculture

Amendments will ensure that regulations under the National Greenhouse and Energy Reporting Act 2007 must not declare that agricultural emissions are covered by the Scheme.  This complements amendments proposed to the main bill.

 

 

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1 C hapter 1     

Transitional arrangements for the Authority

This Chapter refers to amendments that appear in Sheet AL232.

Outline of chapter

1.1                   Amendments (1) to (5) are technical corrections to the consequential amendments bill to ensure the Authority is correctly referred to and can properly exercise its functions.  Amendment (6) ensures that certain employees transferring to the Authority from DCC and ORER start their employment on the same terms and conditions as they had prior to transfer.

Context of amendments

1.2                   The consequential amendments bill includes both consequential amendments and transitional provisions.  The transitional provisions include provisions which are necessary as the result of amendments which will transfer the functions of the Greenhouse and Energy Data Officer (GEDO) under the National Greenhouse and Energy Reporting Act 2007 and the Renewable Energy Regulator (Regulator) under the Renewable Energy (Electricity) Act 2000 to the Authority and associated staffing changes.

Summary of new law

1.3                   Technical amendments will ensure the Authority is correctly referred to and can properly exercise its functions while amendments relating to the employees of the Authority ensure that the terms and conditions of staff transferring to the Authority can be efficiently and effectively maintained. 

Detailed explanation of new law

Transitional provisions

1.4                   Amendments (1) to (3) are technical amendments to ensure the Authority is correctly referred to and can properly exercise its functions [Schedule 1, Part 1, items 57, 57A, 77A and 82A to 82E] .

1.5                   Amendment (4) makes a consequential change to a cross reference [Schedule 1, Part 1, item 83] .

1.6                   Amendment (5) contains two additional transitional provisions required in relation to the transfer of functions from the Regulator and the GEDO to the Authority.  The first ensures that, despite the repeal of section 158 of the Renewable Energy (Electricity) Act 2000 by Item 82A, judicial notice will continue to be taken of the signature of the Regulator, providing the document was signed prior to commencement of Item 93A.  The second provides that, despite the amendment of section 159 of the Renewable Energy (Electricity) Act 2000 by Items 82B to 82E, documents or certificates signed by the Regulator prior to the commencement of Item 93A can be produced as evidence [Schedule 1, Part 1, item 93A] .

Terms and Conditions of Employment

1.7                   The Authority will take over the functions of the GEDO and the Regulator.  Employees responsible for assisting with these functions will be transferred from DCC and ORER to the Authority under a determination made by the Public Service Commissioner under section 72 of the Public Service Act 1999

1.8                   Amendment (6) ensures that certain staff members transferring from DCC or ORER will start their employment with the Authority on the same terms and conditions as their previous employment until such time as the Authority negotiates a new enterprise agreement in accordance with the Fair Work Act 2009 and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 [Schedule 1, Part 1, sub-item 94A(8)]

1.9                   It is important that this occurs by way of legislation, without the Authority having to negotiate a new enterprise agreement with staff as one of its first tasks.  Doing so would divert management attention away from critical decisions and tasks required in the early stages of the Scheme.

Non SES employees covered designated agreements

1.10               For most of the transferring employees, this outcome is achieved by preserving the ‘designated agreement’ that applies to the employees immediately before they are transferred [Schedule 1, Part 1, sub-items 94A(1) and (2)] .

1.11               The designated agreement for DCC will also apply to new employees of the Authority (other than SES employees) employed after the transition day [Schedule 1, Part 1, sub-items 94A(5) and (6)] .

1.12               As the DCC designated agreement will cover employees in both DCC and the Authority after the transition day, the amendments specify that the designated agreement in each agency will be treated as separate agreements for the purposes of the Fair Work Act 2009 and the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 .  This means that the terms and conditions for the Authority’s employees will not be affected if DCC amends or terminates its designated agreement and vice versa [Schedule 1, Part 1,sub- item 94A(7)] .

Employees covered by AWAs

1.13               Transferring employees whose employment terms and conditions are provided for by an AWA will continue to be covered by that AWA following the transition time [Schedule 1, Part 1, sub-item 94A(3)] .  The employee and the Chair of the Authority will be able to deal with that AWA in accordance with the Fair Work (Transitional Provisions and Consequential Amendments) Act 2009 .

1.14               However, if the AWA of an employee who is not an SES employee ceases at any time following their transfer to the Authority, and before the Authority makes an enterprise agreement with its staff, that employee’s terms and conditions of employment will default to those of the DCC designated agreement [Schedule 1, Part 1, sub-item 94A(4)] .

Regulations

1.15               The amendments include a regulation-making power to allow the Governor-General to make regulations providing for transitional arrangements for transferring employees [Schedule 1, Part 1, item 94B] .

 

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2 C hapter 2     

Coal mining

This Chapter refers to amendments that appear in Sheet BE204.

Consequential amendments

2.1                   Amendments (1), (2), (3), (4), (5), (6), (7), and (8) are consequential upon amendments to the main bill to provide limited transitional assistance in respect of coal mining which has significant fugitive emissions of greenhouse gasses [Schedule 2, subitem 420-15(3)] , [Schedule 2, subitem 420-51(2)] , [Schedule 2, subitem 420-55(6)] , [Schedule 2, subitem 420-57(9)] , [Schedule 2, item 420-58] , [Schedule 2, subitem 420-58(1)] , [Schedule 2, subitem 420-65(3)] , [Schedule 2, subitem 420-70(3)] .

How will emissions units issued as assistance to coal miners be treated for income tax purposes?

2.2                   Free emissions units issued for coal mining receive the same income tax treatment as units issued under the emissions-intensive trade-exposed assistance program.  The reason for this is that the implementation of the Scheme is likely to have a disproportionate cost impact on both coal mine operations and emissions-intensive trade-exposed activities.  Thus, it is appropriate that any units they are issued are treated similarly for tax purposes.

2.3                   Free Australian emissions units held at the end of the income year in which they are issued are valued at zero in specified circumstances. This timing rule is known as the ‘no disadvantage’ rule, which is explained in detail in Chapter 2 of the Explanatory Memorandum for the Carbon Pollution Reduction Scheme (Consequential Amendments) Bill 2009.

2.4                   The ‘no disadvantage’ rule is designed to minimise any timing disadvantage that an entity might suffer from bringing to account the value of the free unit as income at the end of the income year in which they are issued.

2.5                   If the entity holds the unit for an additional income year, the free unit is generally valued at cost or market value depending on the choice of valuation method the taxpayer makes.

2.6                   Expenses incurred in becoming the holder of these free emissions units are not deductible under the proposed specific tax provisions for emission units (Division 420 of the Income Tax Assessment Act 1997 ).

2.7                   The proceeds of selling the units are assessable income in the income year that the taxpayer ceases to hold the units, in accordance with the general treatment of emissions units.

 

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3 C hapter 3     

Domestic offsets

This Chapter refers to amendments that appear in Sheet BE219.

Consequential amendments

3.1                   Amendments (1), (2), (3), and (4) are consequential upon amendments to the main bill that allow for the formulation of a program for the issue of free Australian emissions units for eligible offset projects [Schedule 2, subitem 420-15(5A)] , [Schedule 2, subitem 420-65(5A)] , [Schedule 2, subitem 420-70(3)] .

How will emissions units issued under the domestic offsets program be treated for income tax?

3.2                   Units issued under the domestic offsets program are given the same income tax treatment as free units issued for reforestation.  Since taxpayers are receiving a unit in both programs for reducing greenhouse emissions or removing greenhouse gases from the atmosphere, the same tax treatment is appropriate.

3.3                   Free units held at the end of the income year have a cost equal to their market value at the date of issue.  This is consistent with the general treatment of free emissions units.

3.4                   Taxpayers are generally able to deduct the expenses they incur in generating a unit under the normal deduction provisions.  This is a favourable treatment for taxpayers because if the specific tax provisions for emission units (Division 420 of the Income Tax Assessment Act 1997 ) applied, the expenses would potentially have been deferred until the taxpayer started to hold the units. 

3.5                   Expenses incurred in preparing or lodging an application for units under the domestic offsets program will be deducted in the income year that the taxpayer starts to hold the relevant units.

3.6                   The proceeds of selling the units are assessable income in the income year that the taxpayer ceases to hold the units, in accordance with the general treatment of emissions units.

 

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4 C hapter 4

Agricultural emissions

This Chapter refers to amendments that appear in Sheet 232.

Consequential amendments

4.1                   Amendment (7) [Schedule 1, Part 2, item 159] provides that regulations made under paragraph 10(2A)(a) of the National Greenhouse and Energy Reporting Act 2007 must not declare that agricultural emissions are a scope 1 emission covered by the Scheme. 

4.2                   This amendment corresponds to amendments made by Amendments (6) and (7) of Sheet 242 to the main bill [Part 3, Division 2, Subdivision D, clause 24 of the Carbon Pollution Reduction Scheme Bill 2009] which provide that agricultural emissions cannot be included within the meaning of ‘emission of greenhouse gas from the operation of a facility’ for the purposes of clause 24 of the main bill.   

 

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Schedule 1:  General amendments

Bill reference

Paragraph number

Part 1, item 83

1.5

Part 1, item 93A

1.6

Part 1, item 94B

1.15

Part 1, items 57, 57A, 77A and 82A to 82E

1.4

Part 1, sub-item 94A(3)

1.13

Part 1, sub-item 94A(4)

1.14

Part 1, sub-item 94A(8)

1.8

Part 1, sub-items 94A(1) and (2)

1.10

Part 1, sub-items 94A(5) and (6)

1.11

Part 1,sub- item 94A(7)

1.12

Part 2, item 159

4.1

Schedule 2:  Taxation amendments

Bill reference

Paragraph number

Item 420-58

2.1

Subitem 420(5A)

3.1

Subitem 420-15(3)

2.1

Subitem 420-51(2)

2.1

Subitem 420-55(6)

2.1

Subitem 420-57(9)

2.1

Subitem 420-58(1)

2.1

Subitem 420-65(3)

2.1

Subitem 420-65(5A)

3.1

Subitem 420-70(3)

2.1, 3.1