On 16 November 2018, the Income Tax Assessment (Environmental and Natural Resource Management in relation to the Establishment of Trees for the purposes of Carbon Sequestration) Guidelines 2018 (made 12.11.18) was registered on the Federal Register of Legislative Instruments today. They have been made under s 40-1010(3) of the ITAA97.

Subdivision 40-J of the ITAA97, provides that a person can get ‘write-off’ deductions, for amounts of capital expenditure, incurred for establishing trees that meet the requirements for constituting a carbon sink forest (s40-1005). The write-off is at 7% over 14 years and 105 days.

One of the requirements (in s40-1005(1)(a), s40-1010(1)(g), (2)(g)) is that the trees are established in accordance with these ‘guidelines’.

The thrust of these guidelines can be gleaned from the headings:

  1. Carbon sink forest establishment should be based on regionally applicable best practice approaches for achieving multiple land and water environmental benefits.
  2. Carbon sink forest establishment activities should be guided by regional natural resource management plans and water sharing plans, and environmental impacts at a catchment scale should be considered.
  3. Carbon sink forest establishment activities should recognise and adhere to all government regulatory requirements.
  4. Legal rights concerning carbon sequestration in carbon sink forests should be registered on the land title in accordance with state and territory government legislation.

This instrument repeals the Environmental and Natural Resource Management Guidelines in relation to the establishment of trees for the purposes of carbon sequestration that was registered on 1 December 2008, but maintains the intent of those guidelines.

FJM 1.12.18

[LTN 222, 16/11/18; Tax Month – November 2018]


CPD questions (answers available)

  1. Does Subdivision 40-J provide a deduction for the entire cost of establishing the trees in a carbon sink forrest, in the year that the trees were planted (established)?
  2. Is one of the requirements, for these deductions, complying with the regulations that were registered on 16.11.18?
  3. Is one of the requirements for ‘best practice’ approaches to land and water environmental benefits?
  4. Is one of the requirements complying with Government regulatory requirements?
  5. Is one of the requirements registering your rights on land title under Federal Legislation?

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