House of Representatives

Explanatory Memorandum

(Circulated by the authority of the Deputy Prime Minister and Treasurer, the Hon Wayne Swan MP)

Chapter 1 - Conservation tillage refundable tax offset: amendment to the definition of 'eligible no-till seeder'

Outline of chapter

1.1 Schedule 1 to this Bill amends the definition of 'eligible no-till seeder' in section 385-235 of the Income Tax Assessment Act 1997 (ITAA 1997) to ensure that an eligible no-till seeder can comprise just the tool, or the combination of the cart and the tool.

Context of amendments

1.2 The conservation tillage refundable tax offset was introduced as part of the Clean Energy (Consequential Amendments) Act 2011 and took effect from 1 July 2012. It allows primary producers to claim a 15 per cent refundable tax offset on the purchase of new, eligible conservation tillage equipment installed ready for use between 1 July 2012 and 30 June 2015. The tax offset is designed to encourage the take up of conservation tillage farming practices to reduce soil disturbance and erosion and improve water retention in the soil. It forms part of the Carbon Farming Futures program which provides support for action on the ground to reduce emissions, increase soil carbon and improve productivity.

1.3 Eligibility for the tax offset requires, amongst other things, the purchase of a new eligible no-till seeder which, under the current law, is a no-till seeder comprising both the cart and the tool. The tool component of a no-till seeder delivers the benefits of conservation tillage practices, while the cart simply carries the seed and fertiliser. In practice, many primary producers retain their existing cart (also known as an air cart) when upgrading to a new tool (also known as a seeder bar).

1.4 Expanding the definition of an eligible no-till seeder to include just the tool will facilitate primary producers' access to the tax offset and consequently encourage the adoption of conservation tillage techniques.

1.5 On 29 June 2012, the Assistant Treasurer announced the Government's intention to amend the eligibility requirements to allow primary producers who purchase just the tool to access the tax offset (Media Release No. 058).

Summary of new law

1.6 The definition of an eligible no-till seeder is amended to ensure that an eligible no-till seeder can comprise just the tool or the combination of the cart and the tool.

Comparison of key features of new law and current law

Detailed explanation of new law

1.7 The eligibility requirements for the conservation tillage refundable tax offset are set out in section 385-175 of the ITAA 1997. Amongst other things, a taxpayer is entitled to the tax offset for an income year in respect of a depreciating asset if the asset is an eligible no-till seeder.

1.8 An eligible no-till seeder is 'a no-till seeder (comprising the tool, or the combination of the cart and tool)' that has certain features. [Schedule 1, item 1]

1.9 An 'eligible no-till seeder' can comprise either the tool alone or the combination of the cart and tool (but not the cart alone). It is the tool component which delivers the benefits of conservation tillage.

1.10 The other elements of the definition of 'eligible no-till seeder' are set out in paragraphs 385-235(a) to (g). (These detail the essential disc or tine features of a no-till seeder.)

Application and transitional provisions

1.11 This amendment commences on the day the Bill receives the Royal Assent.

1.12 The amendment applies to an eligible no-till seeder which the taxpayer starts to use to carry on a primary production business, or which the taxpayer has installed ready for use to carry on a primary production business, between 1 July 2012 and 30 June 2015. The refundable tax offset is claimable in the taxpayer's income tax return for the 2012-13, 2013-14 or 2014-15 income years. This is consistent with the existing conservation tillage refundable tax offset provisions. [Schedule 1, item 2]

STATEMENT OF COMPATIBILITY WITH HUMAN RIGHTS

Prepared in accordance with Part 3 of the Human Rights (Parliamentary Scrutiny) Act 2011

Conservation tillage refundable tax offset: amendment to the definition of 'eligible no-till seeder'

1.13 This Schedule is compatible with the human rights and freedoms recognised or declared in the international instruments listed in section 3 of the Human Rights (Parliamentary Scrutiny) Act 2011 .

Overview

1.14 This Schedule amends the Income Tax Assessment Act 1997 (ITAA 1997) to expand the application of the conservation tillage refundable tax offset (tax offset).

1.15 As part of the Government's Clean Energy Future Plan, the Clean Energy (Consequential Amendments) Act 2011 amended the ITAA 1997 to support action to reduce greenhouse gases in the farming industry by providing a tax offset to encourage no-till farming practices.

1.16 Under the existing law, to be eligible for the tax offset, a taxpayer is required, among other things, to have an eligible no-till seeder, comprising 'the combination of a cart and tool' (section 385-285 of the ITAA 1997). As it is the tool component which delivers the benefits of conservation tillage practices, item 1 of this Schedule amends the definition of 'eligible no-till seeder' to ensure that an eligible no-till seeder can comprise 'the tool, or the combination of cart and tool'. This means that, provided other existing criteria are met, a taxpayer carrying on a primary production business may be eligible to claim a 15 per cent conservation tillage refundable tax offset whether they purchase just the conservation tillage tool or a combination of the cart and the tool.

1.17 Item 2 applies the amendments to the 2012-13, 2013-14 and 2014-15 income years. This enables the benefit conferred by item 1 to be immediately available to eligible taxpayers. While the Schedule operates retrospectively, the measure operates to the benefit of affected taxpayers.

Human rights implications

1.18 This Schedule engages and promotes the right to health in Article 12 of the International Covenant of Economic, Social and Cultural Rights. The UN Committee on Economic, Social and Cultural Rights has interpreted Article 12 to extend to the underlying determinants of health, including a healthy environment. No-till farming practices aim to reduce soil disturbance and erosion, increase nutrient availability and reduce water loss. These environmental benefits may lead to greater food production capacity.

Conclusion

1.19 This Schedule is compatible with human rights. It promotes the right to health.