John Durie: Government hands farmers a tax win on carbon credits. Now it’s time to take on the big emitters

The federal government’s decision to bring carbon credit income into the farm income net this week was widely applauded by small business farmers and the carbon club as being a welcome and logical change.

The decision, along with other recent changes to the carbon rules, underlines the fact Australia’s move toward net zero emissions is focussed heavily on the farm as offering the best form of mitigation.

For its next trick the government might change the rules that limit so called carbon farming to 30% of a property for fear farmers will stop growing wheat and instead focus efforts on so called ‘human-induced revegetation’ and other methods of earning carbon credits.

The credits are sold by the government, and in theory, can increasingly be sold on the open market proving they follow the right methodology.

The rule limiting carbon farming was introduced last year and runs against the policy intent of the latest tax change.

The cry from the carbon club is demand is not the problem; it’s lack of supply. And anything that can improve supply is like mother’s milk — it is good.

Likewise the sustainable farming model boosts biodiversity, helping to protect endangered species, which is also good for the country. 

No problem here, but for a really well-rounded carbon policy, the government might also address carbon supply issues by way of increased safeguards to force big emitters out of the game — or at the very least increase their level of offsets.

A welcomed change for farmers

This may be a bridge too far for this government, but at least the National Party is kicking some goals by getting farmers the changes they wanted.

If you grow wheat, you may suffer drought for two years, have mixed output for another two, and then have three bumper years.

The government helps out by allowing you to average returns over seven years, so the good years are matched against the bad.

When some farmers started earning extra income from producing to sell to the government as carbon credit units, the tax office said this could not fall under the seven-year averaging program as it was off farm income. 

A wheat farmer who also earned carbon credits then hard to pay two different tax statements, which made no sense and also did nothing to help convince farmers to make changes to abate carbon.

Carbon mitigation techniques include not chopping down trees and clearing land, and rotating cattle to different pastures to help protect land cover and in the process, increase the carbon content of soil.

Such good farming practices cost money because you need more fences to rotate animals more often. But they also help the environment, which is a good thing.

The government is also going to allow farmers to generate carbon income from multiple different practices, from soil carbon to better crop management and savannah burning.

All of the above helps boost farm income and this week’s changes takes the Australian Taxation Office out of the equation by treating sustainable farm practices earning carbon credits as farm income, in the same way as selling wheat or beef.

The farmer gets help to manage the farm better and the nation benefits by lower carbon emissions.

It’s great for farmers and now the next leg is to take the stick to the big emitters.