Carbon sink forests

Overview

Since 1 July 2007, you have been able to claim a deduction for expenditure you incur establishing trees in a carbon sink forest under Subdivision 40-J of the Income Tax Assessment Act 1997 (ITAA 1997).

This deduction encourages the establishment of carbon sink forests for the dedicated purpose of carbon sequestration, that is, the process by which trees absorb carbon dioxide from the atmosphere.

To claim this deduction, you must meet certain conditions.

What conditions do you need to meet?

To claim a tax deduction for costs associated with establishing a carbon sink forest you must meet certain conditions, including all of the following:

• You must be carrying on a business.
• Your primary and principal purpose for establishing the trees is carbon sequestration by the trees.
• You did not incur the expenditure under a managed investment scheme (MIS) or a forestry MIS.
• The trees in the carbon sink forest meet certain forest characteristics and adhere to certain environmental and natural resource management guidelines.