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Since 1 July 2022, the federal government have allowed proceeds from the sale of Australian Carbon Credit Units (ACCUs) and biodiversity certificates generated from on-farm activities to be treated as primary production income (PPI). This means eligible primary producers are able to access income averaging arrangements for ACCU income and access to the Farm Management Deposits (FMD) scheme.
This is a promising change for farmers across the Esperance, Ravensthorpe, Lake Districts and Wheatbelt regions who are interested in starting or continuing carbon farming activities. The Australian carbon market - especially carbon farming - is rapidly progressing and many farmers are transforming their farming practices to improve sustainability and add an additional income stream.
As the number of businesses involved in carbon farming continues to grow, technology aligned with carbon farming practices continues to progress along with government support.
According to the Federal Government’s net zero plan “The Australian Way”, $400 million in additional revenue could be generated by farm landholders through soil carbon farming projects by 2050. You’ve undoubtedly heard about the opportunities of carbon farming to unlock income streams and improve efficiency and profitability, but if you don’t know where to start, you’re certainly not alone.
Quite simply, carbon farming is about managing vegetation, fire, soil or livestock to either increase storage of carbon in the landscape or avoid the release of damaging greenhouse gases such as methane and nitrous oxide.
Carbon farming is critical to our climate change response, but also provides benefits to farmers via additional income streams and the opportunity to partake in leading technologies and practices to optimise productivity and profits.
Under the Australian Government framework known as the Emissions Reduction Fund (ERF), there are currently three broad categories of carbon farming: agricultural methods, vegetation methods and Savanna burning methods.
Activities that are relevant to farmers across the region here in South-East Western Australia and the Wheatbelt are soil carbon sequestration projects (drawing down carbon from the atmosphere and storing it in soil and vegetation) and planting native trees and shrubs.
The Emissions Reduction Fund (ERF) underpins Australia’s domestic carbon market. The tradeable commodity on the carbon market is the Australian Carbon Credit Unit (ACCU). Each ACCU represents 1 tonne of carbon dioxide equivalence.
The demand for ACCUs previously came predominantly through the government’s Emissions Reduction Fund (ERF), but the private sector is keeping pace as private businesses take steps to decarbonise operations and meet ESG (environmental, social and governance) targets.
The Clean Energy Regulator are now designing a carbon trading platform for carbon credits. This will make trading easier, increase price transparency, reduce complexities and barriers to entry and help more businesses to participate in carbon farming.
Farmers can participate in the Emissions Reduction Fund (ERF). The first step is to register your project with via the ERF Client Portal. You can view a map of some of the local and national ERF projects being undertaken here.
Note the Synergy Reforestation Project, (establishing permanent plantings of Eucalyptus camaldulensis, Eucalyptus cladocalyx, Eucalyptus kochii, Eucalyptus loxophleba and Eucalyptus polybractea trees on land that was previously used for agricultural purposes) across the Lort River, Grass Patch, Scaddan and Dalyup regions.
The CSIRO’s LOOC-C (‘Look See’) app gives farmers detailed assessments of how their land and farming practices could be eligible for rebates under the Climate Solutions Fund (CSF). It’s unique and the quickest way of finding out what carbon farming options are available for a farm and what the benefits might be.
The Carbon Market Institute is an independent industry association helping businesses to manage risks and capitalise on carbon farming opportunities.
Rabobank recently held the first of ten dedicated Carbon Farming and Carbon Neutral Agriculture Workshops to lay the foundation and building blocks for farmers and staff to understand the pathways towards a low emission, or potentially carbon neutral, farm business. Their recent article “Decluttering the carbon farming conversation” provides invaluable insight into how to begin the carbon farming journey.
If you're interested in adding carbon farming to your farming activities and want to learn more about how you can benefit from the change in tax treatment from the sale of ACCUs and biodiversity certificates, reach out below.
If you haven’t heard of Primary production averaging (or your ‘five-year average’) before, you’re not alone. It’s a specialised area of agribusiness taxation. If your Accountant doesn’t specialise in primary production accounting, they may not know how to use your five-year average to your tax advantage, ensuring your maximum cashflow is kept in your business.
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