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Budget 2007: Tax change for carbon sink forests.



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MEDIA RELEASE The Hon Malcolm Turnbull MP Minister for the Environment and Water Resources

ENV19 8 MAY 2007

TAX CHANGE FOR CARBON SINK FORESTS

Minister for the Environment and Water Resources, Malcolm Turnbull, today announced new tax arrangements applying to the costs of establishing forests for the dedicated purpose of reducing greenhouse gas emissions.

Forests act as carbon sinks by absorbing carbon dioxide from the air, storing it as carbon in their woody tissues.

The Government will allow carbon sink forest operators to depreciate the costs of establishing a qualifying carbon sink forest under the horticultural plant provisions, with effect from 1 July 2007.

As an additional enhancement to encourage the early establishment of carbon sink forests, the Government will introduce immediate deductibility for costs incurred in establishing a qualifying carbon sink forest during a five-year period commencing 1 July 2007. The immediate deduction will take precedence over the general horticultural provisions during this period.

Mr Turnbull said the growing of carbon sink forests was a new industry.

“Energy, resources and other greenhouse gas emitting industries are already showing increased interest in this form of emissions offset project, for both their carbon sequestration and broader environmental benefits,” Mr Turnbull said.

“Establishing forests to remove carbon dioxide from the atmosphere is a significant and cost-effective way for Australia to reduce greenhouse gas emissions.

“In particular, carbon sink forests can make an important contribution in the medium term to Australia’s climate change response efforts, ahead of the deployment of low emissions energy technologies in which the Government is currently making very large investments in research and demonstration.

“The major contribution being made already by a range of land management practices to achievement of our 108 percent Kyoto emissions target shows how important future climate change response efforts on the land can be.

“Expanding new commercial forestry plantations through the ‘2020 Vision’, assisted through concessional tax treatment, has produced investment in more than half a million hectares of plantations over the last ten years.

“Areas of environmental plantings of trees have increased at an average rate of about 25,000 hectares per year since 1990.

“This domestic forests measure complements the Australian Government’s recently announced $200 million Global Initiative on Forests and Climate which will reduce global deforestation, increase forest planting and promote sustainable forest practices.

“The Government is also investing large sums to support revegetation of the landscape through the $3.1 billion Natural Heritage Trust and the $1.4 billion National Action Plan for Salinity and Water Quality.

“By 2010, commercial forests and environmental plantings established since 1990 will remove 21 million tonnes of carbon dioxide from the atmosphere per year.

“This is in addition to a 65 per cent reduction in greenhouse gas emissions from deforestation between 1990 and 2010.

“As well as helping to address climate change, carbon sink forests can provide habitat for plants and animals, help manage salinity and enhance farm productivity.

“Growing carbon sink forests can give farmers an opportunity to diversify their land management activities and generate additional income.”

To be eligible for carbon sink forest tax concessions, businesses will need to participate in the Government’s Greenhouse Challenge Plus programme, a government/industry partnership that encourages industry actions to reduce greenhouse gases. Carbon sink forest projects must also demonstrate that they comply with environmental and natural resource management guidelines applicable for their geographic location.

This element will ensure the integrity of carbon sink forests in meeting national objectives on emissions offsets and on natural resources management, for example by making sure that carbon sink projects do not have unintended consequences for flora and fauna habitats or on water resources.

Media Contact: Brad Burke: 0400 337 252 Sarah Stock: 0404 848 186

Supporting Information

Why is this important?

• Carbon sink forests can make an important contribution in the medium-term to Australia’s climate change response efforts, ahead of the deployment of low emission energy technologies in which the Government is currently investing.

Who will benefit?

• Those communities, regions and industries involved in the plantation of carbon sink forests.

• There will be a broader environmental benefit through the offsetting of carbon emissions.

What funding is the Government committing to the initiative?

• $23.6 million over four years.

What have we done in the past?

• This domestic forests measure complements the Australian Government’s recently announced $200 million Global Initiative on Forests and Climate which will reduce global deforestation, increase forest planting and promote sustainable forest practices.

• The Government is also investing large sums to support revegetation of the landscape through the $3.1 billion Natural Heritage Trust and the $1.4 billion National Action Plan for Salinity and Water Quality.

When will the initiative conclude?

• The initiative is ongoing.