Michael Ronaldson (Victoria, Liberal Party, Shadow Special Minister of State) Share this | Hansard source

Exactly. As Senator Conroy has said, they have spent $100 to get $30 because, by design, this will be timber that has minimal value. If you have a look at the approval requirement for the Department of Climate Change, it will be quite obvious. So you have a cleared paddock, you are $70 worse off, plus you have lost production from the paddock for however long those trees were in the ground.

The issue of fire was also raised while debating the bill in the committee stage last night. It is correct that natural disasters occur and thus fire is a possibility, but I stress it is an unknown event in relation to when, where and the severity. Any deliberate action to burn the trees down would reasonably be considered an attempt to subvert the Income Tax Assessment Act and thus the commissioner would be able to act under part IVA of the tax act, which of course contains general anti-avoidance provisions.

A further concern was raised: what if the trees are not the right species or do not deliver the carbon credits? That is why the Minister for Climate Change and Water will set out the guidelines for compliance. The Greenhouse Office has been certifying carbon sink forests for some time and it actually has world-leading experience in this. So if the species are wrong then people will not get the tax deduction. And if they do not get the certification then they will not be able to sell the carbon credits; therefore, they will have no income.

A further concern was raised: what if a taxpayer plants the trees for a carbon sink in good faith and then sells his property to someone else who cuts the trees down? Before I get on to that, I will just mention some comments made by Senator Bob Brown in relation to the proposed 100 years. Realistically, it is hard to imagine a situation where anyone could, administratively, keep track of sale and resale, purchase and repurchase over 100 years. It beggars belief that, over 100 years, you could in any way properly manage that. As I said before, a further concern was raised about a taxpayer who plants trees for a carbon sink in good faith and then sells his property to someone else who cuts the trees down. If the person who plants the trees gets the carbon sink deduction and sells the carbon credits, then surely they have a contractual obligation to keep the trees in situ for a lengthy period. They would have to be preserved, even if the property changed hands. It would be like selling a property subject to an easement or whatever.

But what if a person who had planted trees did not sell the carbon credits? Why would you plant a carbon sink forest and then not sell credits? Why would you do that? It is highly unlikely. If they then sell the property, with the trees, the purchaser may be able to, subject to native vegetation rules in their particular state, cut them down. But the vendor would not have received any capital benefit from the trees having been there if the purchaser plans to cut them down, unless they are valuable as timber, in which case the vendor would have used the forestry tax regime when he planted them in the first place. They would still be getting the depreciation over the 14-year period anyway. So what is the advantage in that situation for someone to cut the trees down? They are still getting that depreciation.

We have, again, given this matter due consideration overnight, having been requested to do so, as have both the government and the opposition—and I cannot speak for Senator Conroy, but I assume this matter has again been given due consideration overnight—to ensure that, following concerns that were raised, we are getting this right. We are confident that we are getting it right, having taken the quite unusual step of pulling this legislation out at the eleventh hour to enable these discussions to take place. The reality is that this legislation is a great boon for farmers in marginal country. You can plant carbon-retentive species, typically mallees, which are basically worthless for timber purposes. It aids in the fight against salinity, it improves the productivity of the land adjacent to carbon sink forests, and I understand the way they operate in Western Australia is by having extra wide shelter belts.

The opposition supports the policy of encouraging the early establishment of carbon sink forests through providing immediate deductibility for costs incurred in establishing a qualifying carbon sink forest during the five-year period that commenced on 1 July 2007. It is good for farmers and it is good for the environment. And we believe in the integrity of the government’s legislation, which we readily acknowledge was the former government’s legislation. It was good legislation then and, having given this appropriate consideration overnight, we believe it is good legislation now and we will be supporting it.