Duty treatment of carbon units

Preamble/Background

1. This ruling outlines the view of the Chief Commissioner on whether trading in carbon units is subject to duty.
2. Carbon units are an item of property created under the Clean Energy Act 2011 (Cth).
3. There must be a “dutiable transaction” over “dutiable property” for a liability for duty to arise under Chapter 2 of the Duties Act 1997.

Ruling

4. Section 103 of the Clean Energy Act 2011 (Cth) states that a carbon unit is personal property and “is transmissible by assignment, by will and by devolution by operation of law”. However, the Duties Act does not treat property as “dutiable property“ unless it falls within one of the specific categories of “dutiable property” in section 11 of the Duties Act.
5. Section 11(g) of the Duties Act includes as a "business asset" a "statutory licence or permission under a Commonwealth Law".
6. If a carbon unit operated as a permit to emit greenhouse gases where emission is otherwise prohibited, the application of duty to trading of carbon units as a transfer of dutiable property would be a possibility. However, the Clean Energy Act 2011 (Cth) does not include a prohibition against emissions of the relevant gases without the holding of carbon units.
7. The Clean Energy Act 2011 (Cth) creates a regime for the surrender of carbon units and payment of a shortfall amount referrable to emissions. There is no requirement to hold carbon units in order to emit greenhouse gases. The consequence of not doing so is not the contravention of any law but a liability for a shortfall payment. Therefore carbon units are not a “statutory licence or permission under a Commonwealth law”.
8. Even if a carbon unit were a "licence or permission" there is no jurisdictional nexus with NSW. The Duties Act, in the case of a statutory licence or permission under a Commonwealth law, requires that the rights under the licence or permission have been exercised in New South Wales during the previous 12 months, in respect of New South Wales or in an area that includes New South Wales or a part of New South Wales. There are no "rights" under a carbon unit capable of exercise in the manner contemplated by the Duties Act in respect of New South Wales. To the extent that a carbon unit might be regarded as carrying "rights", those rights can only be exercised by surrender to the Clean Energy Regulator located in the Australian Capital Territory.
9. Carbon units are not considered to be an interest in land because of their statutory characterisation under section 103 of the Clean Energy Act 2011(Cth) as personal property.
10. In summary carbon units are not considered to be "dutiable property' under section 11 of the Duties Act 1997.