Clean Energy (Consequential Amendments) Act 2011 (132 of 2011)

Schedule 2 Taxation amendments

Part 2 Amendments commencing at the same time as section 3 of the Clean Energy Act 2011 commences

Income Tax Assessment Act 1997

28 After Part 3-45

Insert:

Part 3-50 - Climate change

Division 420 - Registered emissions units

Table of Subdivisions

Guide to Division 420

420-A Registered emissions units

420-B Acquiring registered emissions units

420-C Disposing of registered emissions units etc.

420-D Accounting for registered emissions units you hold at the start or end of the income year

420-E Exclusivity of Division

Guide to Division 420

420-1 What this Division is about

This Division deals with amounts you can deduct, and amounts included in your assessable income, because of these situations:

• you acquire a registered emissions unit;

• you hold a registered emissions unit at the start or the end of the income year;

• you dispose of a registered emissions unit.

Table of sections

420-5 The 4 key features of tax accounting for registered emissions units

420-5 The 4 key features of tax accounting for registered emissions units

The purpose of income tax accounting for registered emissions units is to produce the same tax treatment, irrespective of your purpose in acquiring or holding the registered emissions units.

There are 4 key features:

(1) You bring your gross expenditure and gross proceeds to account, not your net profits and losses on disposal of a registered emissions unit.

(2) The gross expenditure is deductible.

(3) The gross proceeds are assessable income.

(4) You must bring to account any difference between the value of your registered emissions units held at the start and at the end of the income year. This is done in such a way that:

(a) any increase in value is included in assessable income; and

(b) any decrease in value is a deduction.

Subdivision 420-A - Registered emissions units

Table of sections

420-10 Meaning of registered emissions unit

420-12 Meaning of hold a registered emissions unit

420-10 Meaning of registered emissions unit

A registered emissions unit is:

(a) a*carbon unit; or

(b) a*Kyoto unit; or

(d) an*Australian carbon credit unit;

for which there is an entry in a Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011).

420-12 Meaning of hold a registered emissions unit

(1) You hold a*registered emissions unit if you are the entity in whose Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) there is an entry for the unit.

(2) However, if the entity (the nominee entity ) in whose Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) there is an entry for a*registered emissions unit holds the unit as nominee for another entity:

(a) the other entity is taken to hold the unit; and

(b) the nominee entity is taken not to hold the unit.

Subdivision 420-B - Acquiring registered emissions units

Table of sections

420-15 What you can deduct

420-20 Non-arm's length transactions and transactions with associates

420-21 Incoming international transfers of emissions units

420-22 Becoming taxable in Australia on the proceeds of sale of registered emissions units

420-15 What you can deduct

(1) You can deduct expenditure to the extent that you incur it in becoming the*holder of a*registered emissions unit.

Note: A carbon unit is an example of a registered emissions unit. You can become the holder of a carbon unit as a result of the unit being issued to you under theClean Energy Act 2011 or as a result of your acquisition of the unit from another entity.

Timing

(2) You deduct the expenditure in the income year in which you start to*hold the*registered emissions unit.

Free carbon units

(3) You cannot deduct under this section expenditure you incur in becoming the*holder of a*carbon unit issued to you in accordance with:

(a) the Jobs and Competitiveness Program (within the meaning of theClean Energy Act 2011); or

(b) Part 8 (coal-fired electricity generation) of that Act.

Australian carbon credit units

(4) You cannot deduct under this section expenditure you incur in becoming the*holder of an*Australian carbon credit unit issued to you in accordance with theCarbon Credits (Carbon Farming Initiative) Act 2011unless you incur the expenditure in preparing or lodging:

(a) an application for a certificate of entitlement (within the meaning of that Act); or

(b) an offsets report (within the meaning of that Act).

No deduction if sale proceeds would not be assessable

(5) You cannot deduct under this section expenditure you incur in becoming the*holder of a*registered emissions unit if, assuming that you had sold the unit to someone else immediately after you started to*hold the unit, the proceeds of the sale would not have been included in your assessable income under section 420-25.

Note: Under theInternational Tax Agreements Act 1953, for some foreign residents, the proceeds of the sale of a registered emissions unit are not assessable income in Australia.

420-20 Non-arm's length transactions and transactions with associates

(1) If:

(a) an entity becomes the*holder of a*registered emissions unit; and

(b) either:

(i) the entity and the previous holder of the unit did not deal with each other at arm's length; or

(ii) the previous holder is the entity's*associate; and

(c) the entity did not pay or give consideration equal to the*market value of the unit for becoming the holder of the unit;

the entity is treated as if:

(d) the entity had incurred expenditure in becoming the holder of the unit; and

(e) the amount of the expenditure were equal to that market value.

(2) This section does not apply if a*registered emissions unit*held by an individual just before the individual's death:

(a) devolves to the individual's*legal personal representative; or

(b) *passes to a beneficiary in the individual's estate.

(3) This section does not apply to:

(a) the issue of a*carbon unit under theClean Energy Act 2011; or

(b) the issue of an*Australian carbon credit unit under theCarbon Credits (Carbon Farming Initiative) Act 2011.

Note: In the application of Division 13 of Part III of theIncome Tax Assessment Act 1936(about international transfer-pricing arrangements), this section is disregarded - see subsection 136AB(2) of theIncome Tax Assessment Act 1936.

420-21 Incoming international transfers of emissions units

Unit held as trading stock or as a revenue asset

(1) If:

(a) any of the following conditions is satisfied:

(i) a*carbon unit is transferred from your foreign account (within the meaning of theClean Energy Act 2011) to your Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) or your nominee's Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011);

(ii) a carbon unit is transferred from your nominee's foreign account (within the meaning of theClean Energy Act 2011) to your Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) or your nominee's Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011);

(iii) an*international emissions unit is transferred from your foreign account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) to your Registry account (within the meaning of that Act) or your nominee's Registry account (within the meaning of that Act);

(iv) an international emissions unit is transferred from your nominee's foreign account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) to your Registry account (within the meaning of that Act) or your nominee's Registry account (within the meaning of that Act);

(v) an*Australian carbon credit unit is transferred from your foreign account (within the meaning of theCarbon Credits (Carbon Farming Initiative) Act 2011) to your Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) or your nominee's Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011);

(vi) an Australian carbon credit unit is transferred from your nominee's foreign account (within the meaning of theCarbon Credits (Carbon Farming Initiative) Act 2011) to your Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) or your nominee's Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011); and

(b) as a result of the transfer, you start to*hold the unit as a*registered emissions unit; and

you are treated as if:

(d) just before the transfer, you had sold the unit to someone else for its*cost; and

(e) you had, immediately after the sale, bought it back as a registered emissions unit for the same amount.

Example: An Australian resident company carries on a business of trading in emissions units. The units are trading stock. The company owns 10,000 emission reduction units (a type of international emissions unit) that are registered in New Zealand. 5,000 of those emission reduction units are transferred from the company's New Zealand registry account to the company's Australian registry account.

The company is treated as having sold each unit to someone else at its cost just before it became a registered emissions unit. As the unit was previously held as trading stock, the unit ceases to be trading stock (section 70-12). The cost of the unit just before it became a registered emissions unit is included in the company's assessable income.

The company is also treated as having bought 5,000 registered emissions units for the same amount. The company is entitled to a deduction for that amount (section 420-15).

Unit held otherwise than as trading stock or as a revenue asset

(2) If:

(a) any of the following conditions is satisfied:

(b) as a result of the transfer, you start to*hold the unit as a*registered emissions unit; and

you are treated as if:

(d) just before the transfer, you had sold the unit to someone else for its*market value just before the transfer; and

(e) you had, immediately after the sale, bought it back as a registered emissions unit for the same amount.

420-22 Becoming taxable in Australia on the proceeds of sale of registered emissions units

If:

(a) you start to*hold a*registered emissions unit at a particular time; and

(b) assuming that you had sold the unit to someone else immediately after you started to hold the unit, the proceeds of the sale would not have been included in your assessable income under section 420-25; and

(c) you hold the unit until a later time (the taxable status commencement time ), where the following conditions are satisfied:

(i) assuming that you had sold the unit to someone else immediately before the taxable status commencement time, the proceeds of the sale would not have been included in your assessable income under section 420-25;

(ii) assuming that you had sold the unit to someone else at the taxable status commencement time, the proceeds of the sale would have been included in your assessable income under section 420-25;

you are treated as if:

(d) immediately after the taxable status commencement time, you had bought the unit from someone else for its*market value; and

(e) you had started to hold the unit immediately after the taxable status commencement time instead of at the time mentioned in paragraph (a).

Note: Under theInternational Tax Agreements Act 1953, for some foreign residents, the proceeds of the sale of a registered emissions unit are not assessable income in Australia.

Subdivision 420-C - Disposing of registered emissions units etc.

Table of sections

420-25 Assessable income on disposal of registered emissions units

420-30 Non-arm's length transactions and transactions with associates

420-35 Outgoing international transfers of emissions units

420-40 Disposal of registered emissions units for a purpose other than gaining assessable income

420-41 Ceasing to be taxable in Australia on the proceeds of sale of registered emissions units

420-42 Deduction for expenses incurred in ceasing to hold a registered emissions unit

420-43 Deduction for charge imposed on the surrender of an eligible international emissions unit

420-25 Assessable income on disposal of registered emissions units

(1) Your assessable income includes an amount that you are entitled to receive because you cease to*hold a*registered emissions unit.

Timing

(2) The amount is included in your assessable income for the income year in which you cease to*hold the unit.

Source

(3) An amount included in your assessable income under subsection (1) is taken, for the purposes of the*income tax laws, to have a source in Australia.

420-30 Non-arm's length transactions and transactions with associates

If:

(a) an entity (the transferor ) ceases to*hold a*registered emissions unit; and

(b) the cessation is because of the transfer of the unit to:

(i) a Registry account (within the meaning of theAustralian National Registry of Emissions Units Act 2011); or

(ii) a foreign account (within the meaning of that Act);

kept by another entity (the transferee ); and

(i) the transferor and the transferee did not deal with each other at arm's length; or

(ii) the transferee is the transferor's*associate; and

(d) the transferee did not pay or give consideration equal to the*market value of the unit for the transfer of the unit;

the transferor is treated as if the transferor were entitled to receive an amount equal to that market value because the transferor ceased to be the holder of the unit.

420-35 Outgoing international transfers of emissions units

If:

(a) you stop*holding a*registered emissions unit; and

(b) you do so as a result of the transfer of the unit to:

(i) if the unit is a*carbon unit - your foreign account (within the meaning of theClean Energy Act 2011) or your nominee's foreign account (within the meaning of that Act); or

(ii) if the unit is an*international emissions unit - your foreign account (within the meaning of theAustralian National Registry of Emissions Units Act 2011) or your nominee's foreign account (within the meaning of that Act); or

(iii) if the unit is an*Australian carbon credit unit - your foreign account (within the meaning of theCarbon Credits (Carbon Farming Initiative) Act 2011) or your nominee's foreign account (within the meaning of that Act);

you are treated as if:

(d) you had, immediately after the sale, bought it back for the same amount.

Example: An Australian resident company carries on a business of trading in emission units. The company owns 10,000 emission reduction units (a type of international emissions unit) that are registered in Australia. 5,000 of those units are transferred from the company's Australian registry account to the company's New Zealand registry account.

The company is treated as having sold each unit to someone else at its market value just before it stopped being a registered emissions unit. As the unit was a registered emissions unit, the market value is included in the company's assessable income (section 420-25).

The company is also treated as having bought 5,000 emission reduction units for the same amount. As those units are trading stock, the company may be able to deduct that amount under section 8-1.

420-40 Disposal of registered emissions units for a purpose other than gaining assessable income

(1) If:

(a) an entity (the first entity ) incurs expenditure in:

(i) becoming the*holder of a*registered emissions unit; or

(ii) ceasing to hold a registered emissions unit; and

(b) the first entity has deducted or can deduct the expenditure under section 420-15 or 420-42; and

(d) the cessation is neither:

(i) in gaining or producing the first entity's assessable income; nor

(ii) in carrying on a*business for the purpose of gaining or producing the first entity's assessable income; and

(e) section 420-30 (non-arm's length transactions and transactions with associates) did not apply to the first entity ceasing to hold the unit;

the first entity's assessable income for that income year includes an amount equal to the amount the first entity has deducted or can deduct.

Death

(2) If:

(a) the first entity is an individual; and

(b) the cessation is because of the first entity's death; and

then:

(d) the first entity's legal personal representative is treated as having bought the unit for the amount included in the first entity's assessable income under subsection (1); and

(e) if the unit*passes to a beneficiary in the first entity's estate:

(i) the first entity's legal personal representative is treated as having disposed of the unit for the amount included in the first entity's assessable income under subsection (1); and

(ii) the beneficiary is treated as having bought the unit for the amount included in the first entity's assessable income under subsection (1).

(3) If:

(a) the first entity is an individual; and

(b) the cessation is because of the first entity's death; and

(c) the*registered emissions unit*passes to a beneficiary in the first entity's estate without devolving to the first entity's*legal personal representative;

the beneficiary is treated as having bought the unit for the amount included in the first entity's assessable income under subsection (1).

Transfer - treatment of acquirer

(4) If:

(a) the cessation is because of the transfer of the unit to another entity; and

(b) neither subsection (2) nor (3) applies;

the other entity is treated as having bought the unit for the amount included in the first entity's assessable income under subsection (1).

(5) If subsection (4) applies to the transfer of the unit to another entity:

(a) the first entity must inform the other entity that, as a result of subsection (4) applying, the other entity is treated as having bought the unit for a particular amount; and

(b) the first entity must do so:

(i) at, or as soon as practicable after, the time of the transfer; or

(ii) by a later time allowed by the Commissioner.

Source

(6) An amount included in the first entity's assessable income under subsection (1) is taken, for the purposes of the*income tax laws, to have a source in Australia.

420-41 Ceasing to be taxable in Australia on the proceeds of sale of registered emissions units

If:

(a) you start to*hold a*registered emissions unit; and

(b) assuming that you had sold the unit to someone else immediately after you started to hold the unit, the proceeds of sale would have been included in your assessable income under section 420-25; and

(c) you hold the unit until a later time (the taxable status cessation time ), where the following conditions are satisfied:

(i) assuming that you had sold the unit to someone else immediately before the taxable status cessation time, the proceeds of the sale would have been included in your assessable income under section 420-25;

(ii) assuming that you had sold the unit to someone else at the taxable status cessation time, the proceeds of sale would not have been included in your assessable income under section 420-25;

you are treated as if:

(d) just before the taxable status cessation time, you had sold the unit to someone else for its*market value; and

(e) you had, at the taxable status cessation time, bought it back for the same amount.

Note: Under theInternational Tax Agreements Act 1953, for some foreign residents, the proceeds of the sale of a registered emissions unit are not assessable income in Australia.

420-42 Deduction for expenses incurred in ceasing to hold a registered emissions unit

(1) You can deduct expenditure to the extent that you incur it in ceasing to*hold a*registered emissions unit.

Timing

(2) You deduct the expenditure in the income year in which you cease to*hold the*registered emissions unit.

420-43 Deduction for charge imposed on the surrender of an eligible international emissions unit

(1) You can deduct an amount of charge imposed by theClean Energy (International Unit Surrender Charge) Act 2011 on the surrender by you of an eligible international emissions unit (within the meaning of theAustralian National Registry of Emissions Units Act 2011).

Timing

(2) You deduct the amount in the income year in which you pay the amount.

Subdivision 420-D - Accounting for registered emissions units you hold at the start or end of the income year

Table of sections

420-45 You include the value of your registered emissions units in working out your assessable income and deductions

420-50 Value of registered emissions units at start of income year

420-51 Valuation methods

420-52 FIFO cost method of working out the value of units

420-53 Actual cost method of working out the value of units

420-54 Market value method of working out the value of units

420-55 Valuation method for first income year at the end of which you held registered emissions units

420-57 Valuation method for later income years at the end of which you held registered emissions units

420-58 Value of registered emissions units at end of income year - certain free carbon units

420-60 Cost of registered emissions units

420-45 You include the value of your registered emissions units in working out your assessable income and deductions

(1) You compare:

(a) the*value of all*registered emissions units you*held at the start of the income year; and

(b) the value of all registered emissions units you held at the end of the income year.

Increase in value is included in assessable income

(2) Your assessable income includes any excess of the*value at the end of the income year over the value at the start of the income year.

Decrease in value is a deduction

(3) On the other hand, you can deduct any excess of the*value at the start of the income year over the value at the end of the income year.

Source

(4) An amount included in your assessable income under subsection (2) is taken, for the purposes of the*income tax laws, to have a source in Australia.

Disregard value of unit if sale proceeds would not be assessable

(5) For the purposes of this Subdivision, disregard the*value of a*registered emissions unit you*held at the end of the income year if, assuming that you had sold the unit to someone else immediately after you started to hold the unit, the proceeds of the sale would not have been included in your assessable income under section 420-25.

Note: Under theInternational Tax Agreements Act 1953, for some foreign residents, the proceeds of the sale of a registered emissions unit are not assessable income in Australia.

420-50 Value of registered emissions units at start of income year

(1) The value of a*registered emissions unit you*held at the start of an income year is the same amount at which it was taken into account under this Subdivision at the end of the last income year.

(2) The value of the unit is a nil amount if the unit was not taken into account under this Subdivision at the end of the last income year.

420-51 Valuation methods

(1) The value of a*registered emissions unit you*held at the end of an income year is worked out using one of the following methods:

(a) the*FIFO cost method;

(b) the*actual cost method;

Sections 420-55 and 420-57 tell you which method applies.

(2) This section has effect subject to section 420-58 (certain free carbon units).

420-52 FIFO cost method of working out the value of units

The FIFO cost method for working out the*value of the*registered emissions units you*held at the end of an income year means that the value of the units is the*cost of the registered emissions units, and, for the purposes of the application of this Subdivision to you for the income year:

(a) if any of the registered emissions units are:

(i) *carbon units that have a*vintage year that is the same as, or earlier than, the financial year to which the income year relates; or

(ii) eligible international emissions units (within the meaning of theAustralian National Registry of Emissions Units Act 2011); or

(iii) *Australian carbon credit units;

you must account for those units on a first-in first-out basis; and

(b) if:

(i) any of the registered emissions units are carbon units that have the same vintage year; and

(ii) that vintage year is later than the financial year to which the income year relates;

you must account for those units on a first-in first-out basis; and

(c) if any of the registered emissions units are*Kyoto units that are not eligible international emissions units (within the meaning of theAustralian National Registry of Emissions Units Act 2011) - you must account for those units on a first-in first-out basis.

420-53 Actual cost method of working out the value of units

The actual cost method for working out the value of the*registered emissions units you*held at the end of the income year means that the value of the units is the*cost of the units, and, for the purposes of the application of this Subdivision to you for the income year, you must not account for any of those units on a first-in first-out basis.

420-54 Market value method of working out the value of units

The market value method for working out the value of the*registered emissions units you*held at the end of the income year means that the value of the units is the*market value of the units at the end of the income year.

420-55 Valuation method for first income year at the end of which you held registered emissions units

Scope

(1) This section applies if:

(a) you*held one or more*registered emissions units at the end of an income year; and

(b) the income year is the first income year at the end of which you held one or more registered emissions units.

Choice of method

(2) You may choose one of the following methods:

(a) the*FIFO cost method;

(b) the*actual cost method;

for working out the value of the*registered emissions units you*held at the end of the income year.

FIFO cost method applies if no choice made

(3) If you do not make a choice under subsection (2) for the income year, the value of the*registered emissions units you*held at the end of the income year is worked out using the*FIFO cost method.

Time for making choice

(4) You must make a choice under subsection (2) before you lodge your*income tax return for the income year for which you make the choice.

No revocation of choice

(5) A choice made under subsection (2) cannot be revoked.

Certain free carbon units

(6) This section has effect subject to section 420-58 (certain free carbon units).

420-57 Valuation method for later income years at the end of which you held registered emissions units

Scope

(1) This section applies if:

(a) you*held one or more*registered emissions units at the end of an income year (the current income year ); and

(b) the current income year is not the first income year at the end of which you held one or more registered emissions units.

Choice of method

(2) You may choose one of the following methods:

(a) the*FIFO cost method;

(b) the*actual cost method;

for working out the value of the*registered emissions units you*held at the end of the current income year.

Previous method applies if no choice made

(3) If you do not make a choice under subsection (2) for the current income year, the value of the*registered emissions units you*held at the end of the current income year is worked out using the method that applied to the most recent income year at the end of which you held one or more registered emissions units.

Limitation on choice - before 2015-16 income year

(4) If the current income year is before the 2015-16 income year, you must not make a choice under subsection (2) for the current income year if you have previously made a choice under that subsection for an earlier income year.

Limitation on choice - 2015-16 income year or a later income year

(5) If the current income year is:

(a) the 2015-16 income year; or

(b) a later income year;

you must not make a choice under subsection (2) for the current income year unless:

(c) the same method applied for each of the 4 most recent income years at the end of which you*held one or more*registered emissions units; and

(d) the method mentioned in paragraph (c) is different from the method to which your choice for the current income year relates.

Limitation on choice - change from FIFO cost method to actual cost method

(6) You must not choose under subsection (2) the*actual cost method for the current income year if the*FIFO cost method applied for the most recent income year at the end of which you*held one or more*registered emissions units.

Time for making choice

(7) You must make a choice under subsection (2) before you lodge your*income tax return for the income year for which you make the choice.

No revocation of choice

(8) A choice made under subsection (2) cannot be revoked.

Certain free carbon units

(9) This section has effect subject to section 420-58 (certain free carbon units).

420-58 Value of registered emissions units at end of income year - certain free carbon units

Scope

(1) This section applies to a*carbon unit with a particular*vintage year if:

(a) it was issued to you in accordance with the Jobs and Competitiveness Program (within the meaning of theClean Energy Act 2011); and

(b) you*held it throughout the period:

(i) beginning when it was issued to you; and

(ii) ending at the end of an income year that ended before 1 February in the financial year next following the vintage year.

Value

(2) The value of the unit you*held at the end of an income year that ended during that period is a nil amount.

(3) For the purposes of:

(a) subsection 420-57(3); and

(b) paragraph 420-57(5)(c);

the method that applied to a previous income year mentioned in that subsection or paragraph, as the case may be, is the method that would have applied if this section had not been enacted.

420-60 Cost of registered emissions units

Free carbon units

(1) If a*carbon unit was issued to you free of charge under theClean Energy Act 2011, the cost of the unit is its*market value immediately after you began to*hold the unit.

(2) Subsection (1) does not affect the operation of section 420-58.

Australian carbon credit units

(3) If an*Australian carbon credit unit was issued to you under theCarbon Credits (Carbon Farming Initiative) Act 2011, the cost of the unit is its*market value immediately after you began to*hold the unit.

Other registered emissions units

(4) If a*registered emissions unit (other than an*Australian carbon credit unit) was not issued to you free of charge under theClean Energy Act 2011, the cost of the unit is the total of the expenditure that you:

(a) incurred in becoming the*holder of the unit; and

(b) can deduct under section 420-15.

Subdivision 420-E - Exclusivity of Division

Table of sections

420-65 Exclusivity of deductions etc.

420-70 Exclusivity of assessable income etc.

420-65 Exclusivity of deductions etc.

Expenditure incurred in becoming the holder of a registered emissions unit

(1) You cannot deduct under any provision of this Act outside this Division any expenditure to the extent that you incur it in becoming the*holder of a*registered emissions unit.

(2) To the extent you incur expenditure in becoming the*holder of a*registered emissions unit, the expenditure is not to be taken into account in working out:

(a) an amount you can deduct; or

(b) an amount included in your assessable income;

under any provision of this Act outside this Division.

Free carbon units

(3) Subsections (1) and (2) do not affect the application of a provision of this Act outside this Division to expenditure you incur in becoming the*holder of a*carbon unit issued to you in accordance with:

(a) the Jobs and Competitiveness Program (within the meaning of theClean Energy Act 2011); or

(b) Part 8 (coal-fired electricity generation) of that Act.

Australian carbon credit units

(4) Subsections (1) and (2) do not affect the application of a provision of this Act outside this Division to expenditure you incur in becoming the*holder of an*Australian carbon credit unit issued to you in accordance with theCarbon Credits (Carbon Farming Initiative) Act 2011if you do not incur the expenditure in preparing or lodging:

(a) an application for a certificate of entitlement (within the meaning of that Act); or

(b) an offsets report (within the meaning of that Act).

(5) Subsections (1) and (2) do not affect the operation of Division 30 (deductions for gifts and contributions).

Note: If you make a gift or contribution, Division 30 applies in the normal way to determine whether you can deduct the amount of the gift or contribution.

Expenditure incurred in ceasing to hold a registered emissions unit

(6) You cannot deduct under any provision of this Act outside this Division any expenditure to the extent that you incur it in ceasing to*hold a*registered emissions unit.

420-70 Exclusivity of assessable income etc.

(1) An amount that you are entitled to receive because you ceased to*hold a*registered emissions unit is not to be:

(a) included in your assessable income; or

(b) taken into account in working out your assessable income; or

under any provision of this Act outside this Division.

(2) Subsection (1) does not affect the operation of Division 6 so far as that Division provides for the significance of residence or source for the assessability of ordinary and statutory income.

Note: An amount included in your assessable income under this Division may be ordinary or statutory income for the purposes of Division 6.

Free carbon units

(3) An amount is not to be included in your assessable income under any provision of this Act outside this Division because a*carbon unit was issued to you in accordance with:

(a) the Jobs and Competitiveness Program (within the meaning of theClean Energy Act 2011); or

(b) Part 8 (coal-fired electricity generation) of that Act.

Note 1: A capital gain or capital loss you make from a registered emissions unit is disregarded (subsection 118-15(1)).

Note 2: A capital gain or capital loss you make from a right to receive a free carbon unit is disregarded (subsection 118-15(2)).

Australian carbon credit units

(4) An amount is not to be included in your assessable income under any provision of this Act outside this Division because an*Australian carbon credit unit was issued to you in accordance with theCarbon Credits (Carbon Farming Initiative) Act 2011.

Note 1: A capital gain or capital loss you make from a registered emissions unit is disregarded (subsection 118-15(1)).

Note 2: A capital gain or capital loss you make from a right to receive an Australian carbon credit unit is disregarded (subsection 118-15(3)).

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