Emissions Trading Scheme - technical amendments

2012 amendments to the provisions covering taxation of transactions in emissions units for Negotiated Greenhouse Agreements and Treaty of Waitangi settlements.

Two technical amendments have been made to the provisions which deal with the income tax consequences of transactions in emissions units.

Negotiated Greenhouse Agreements - section ED 1B of the Income Tax Act 2007

The Crown entered into Negotiated Greenhouse Agreements (NGAs) with two businesses some years before the introduction of the Emissions Trading Scheme (ETS). Arrangements have subsequently been entered into between these emitters and the Crown for the transfer of emissions units to these businesses in recognition of the impact of the ETS on the price of their inputs.

The rules which tax income from the receipt of units from the Crown on an accrual basis have been extended to cover all transfers of emissions units referred to in the preceding paragraph. This change follows an earlier extension to section ED 1B, which applied to the first but was not wide enough to cover the procedure subsequently negotiated with the second of the NGA parties.

Application date

The change applies from 1 July 2010.

Treaty of Waitangi settlements - section YA 1 (definition of "pre-1990 forest land emissions units") of the Income Tax Act 2007

The Crown has allocated pre-1990 forest land emissions units in a number of instances when the relevant land is in the process of being transferred to iwi as part of a Treaty settlement. Some Treaty settlements are implemented in two stages - the land and other assets are initially transferred to a representative of a number of iwi, and then on to individual iwi.

Legislation has been amended to ensure that the special tax treatment which applies to pre-1990 forest land emissions units is preserved through this series of transactions. This means that no tax liability will arise if the iwi disposes of the emissions units.

Application date

The change applies from 9 June 2009.