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Edited version of your written advice
Authorisation Number: 1012832781349
Date of advice: 1 July 2015
Ruling
Subject: GST and selling Australian Carbon Credit Units
Question 1
Is A's supply of Australian Carbon Credit Units (ACCUs) a GST-free supply pursuant to section 38-590 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act)?
Answer
Yes.
Relevant facts and circumstances
As part of its business activity A is involved in the buying and selling of emissions units, and specifically Australian Carbon Credit Units (ACCUs) ACCU has the same meaning as in the Carbon Credits (Carbon Farming Initiative) Act 2011). For GST purposes, ACCUs are classed as eligible emissions units and are thus GST-free. A does not pay GST when purchasing ACCUs nor does it charge GST when selling ACCUs.
The contracts under which the buying and selling is done (Contracts) require the delivery of the associated ACCUs into the buyer's Australian National Registry of Emissions Units (ANREU) account. The Contracts only allow for physical settlement i.e. the delivery of the ACCUs into the buyer's ANREU account.
The Contracts list A as either the seller or the buyer of commodities (in this instance eligible ACCUs).
Relevant legislative provisions
A New Tax System (Goods and Services Tax) Act 1999 section 38-590
Carbon Credits (Carbon Farming Initiative) Act 2011 section 5
Carbon Credits (Carbon Farming Initiative) Act 2011 section 147
Reasons for decision
Summary
A's supply of ACCUs is a GST-free supply pursuant to section 38-590 of the GST Act.
Detailed reasoning
Section 38-590 of the GST Act states that a supply of an eligible emissions unit is GST-free. In turn 'eligible emissions unit' is defined in section 195-1 of the GST Act:
eligible emissions unit means:
(a) an *eligible international emissions unit; or
(b) an *eligible Australian carbon credit unit.
As this question deals with ACCUs, paragraph (b) of the definition above is relevant and is itself defined in section 195-1 of the GST Act:
eligible Australian carbon credit unit means:
(a) a Kyoto Australian carbon credit unit (within the meaning of the Carbon Credits (Carbon Farming Initiative) Act 2011); or
(b) a non-Kyoto Australian carbon credit unit (within the meaning of that Act) issued in relation to an eligible offsets project (within the meaning of that Act) for a reporting period (within the meaning of that Act), where:
(i) if it were assumed that the reporting period had ended before the Kyoto abatement deadline (within the meaning of that Act), a Kyoto Australian carbon credit unit would have been issued in relation to the project for the reporting period instead of the non-Kyoto Australian carbon credit unit; and
(ii) the non-Kyoto Australian carbon credit unit is not of a kind specified in the regulations; or
(c) an Australian carbon credit unit (within the meaning of that Act) of a kind specified in the regulations.
Subparagraph (b)(ii) and paragraph (c) do not, by implication, limit the application of subsection 13(3) of the Legislative Instruments Act 2003 to other instruments under this Act.
The Contract refers to ACCU meaning '…a unit issued under Division 2 of Part 11 of the CFI Act …'. Division 2 of Part 11 of the CFI Act contains section 147 which is also the defining section ultimately referenced by paragraph (c) (above) in the section 195-1 of the GST Act definition of 'eligible Australian carbon credit unit'.
Section 5 of the CFI Act (definitions) states that:
Australian carbon credit unit means a unit issued under section 147.
In turn, section 147 of the CFI states:
147 Issue of Australian carbon credit units
The Regulator may, on behalf of the Commonwealth, issue units, to be known as Australian carbon credit units.
It follows that it is this type of unit that you are acquiring and selling.
Your supplies of ACCUs are GST-free. As you are registered for GST you can claim GST credits on associated expenses that your enterprise incurs if GST has been included in the price of those expenses. Given your acquisitions of ACCUs are acquisitions of non-taxable supplies you cannot claim an input tax credit.