Submission on the Clean Energy Legislative Package

On 25 August 2011, the Institute lodged a submission on the Clean Energy Legislative Package (the Package) released by the Deputy Prime Minister and Treasurer, Wayne Swan, and the Minister for Climate Change and Energy Efficiency, Greg Combet, on 28 July 2011.

Some of the Institute’s key submission points include:

Income tax

  • Choice of valuation methods – the Institute considers that imposing limitations on the frequency by which a taxpayer can change valuation method is unwarranted
  • Entry of units held on capital account into the system - the Institute recommends that consideration be given to providing taxpayers that hold emissions units on capital account that commence to be held as registered emissions units the choice to have sold and then immediately bought back the unit for either its market value (which is as currently proposed) or cost
  • Interactions with other tax provisions – areas that may require attention include tax consolidation, MRRT/PRRT, TOFA, State Resource Royalties and Division 57 on the Income Tax Assessment Act 1936
  • Issues originally identified with the Carbon Pollution Reduction Scheme (CPRS) being the treatment of free permits, surrender for a purpose other than gaining assessable income, the scope of taxation rules limited to registered emissions units, abatement and excluded expenses along with other income tax interaction issues requiring development.

Goods and Services Tax (GST)

  • Scope of GST-free treatment of supplies of emissions units – all types of emissions units should be covered, whether registered or unregistered, whether compliance units or voluntary units
  • Derivatives – ‘deliverable’ derivatives should have the same GST treatment as the underlying supply of emissions units. The scope of ‘derivative’ should also be clarified if all types of financial (cash-settled) derivative are intended to be input taxed
  • Denial of input tax credits – acquisitions relating to hedges by taxable enterprises should be creditable to avoid deadweight costs to the economy and cascading GST in the price of goods and services
  • Division 81 – the application of Division 81 to penalties and charges relating to emissions units, as well as emissions units themselves, should be clarified.

Stamp duty

  • The States and Territories should introduce a specific exemption to ensure that dealings in emissions units (including carbon credits relating to land) are not subject to stamp duty.

Fuel tax credits and excise

  • Announcement of carbon price and road user charge - changes in the carbon price and the road user charge should be announced on the same day (as well as applying from the same day) to eliminate confusion in net credit calculations and simplify price setting for forward contracts.
  • Transitional fuel shortages – we anticipate a significant increase in demand for fuel in the periods immediately prior to introduction of the carbon price, and suggest that the government consider making arrangements with the major fuel suppliers to ensure there will not be fuel shortages in those critical periods
  • Rate and calculation complexity - the future fuel excise system and carbon price collection system would be simpler if the fuel tax rate was a flat 38cpl (without three decimal places) and claimants could start from a round number base rate before deducting road user charges and carbon price.

Treasury confirmed that they will consider the above issues in the course of finalising the Clean Energy Bills, which are due to be introduced into Parliament in September 2011.

Article last updated 6 September 2011