On 15 June 2013, Australia’s top 370 emitters were required to pay 75 percent of the ‘carbon tax’ to the Government. That is, those companies needed to surrender to the Clean Energy Regulator (CER), sufficient Australian Carbon Credit Units (ACCUs) to acquit themselves of liability for 75 percent of their Co2-e (Carbon Dioxide equivalent) emissions for the 2012/2013 financial year.
Liability for the remaining 25 percent will not fall due until 1 February 2014. The Federal election has finally been called for 7 September. The Abbott Coalition has vowed to scrap the carbon tax if elected.
This creates an intriguing question: If an Abbott-led Coalition is elected into Government next month and holds true to their promise to revoke the carbon tax, will those companies still have to pay their 25 percent liability come 3 February 2014?
Partner Michele Muscillo and associate Ben Ricketts explore the possible outcomes flowing from the election, and why the short answer is, in all likelihood, yes.
The carbon tax revisited
If a company emitted more than 25,000 tonnes of CO2-e (carbon dioxide equivalent, which includes methane, nitrous oxide and perfluorocarbon - from aluminium production) during the 2012/2013 financial year, it was required to pay the carbon tax, effectively $23.00 per tonne for each tonne above the 25,000 tonne threshold (increasing to $24.15 per tonne for this financial year).
A company pays the carbon tax by “surrendering” to the CER, ACCUs, with each unit being equivalent to one tonne of CO2-e.
ACCUs can be either:
- purchased directly from and then surrendered to the CER;
- provided for free to trade exposed industries under the Government’s Jobs & Competitiveness Programme; or
- bought on the secondary market under the Carbon Farming Initiative.
By 15 June 2013, liable entities were required to surrender sufficient units to acquit themselves of liability for 75 percent of those emissions above the 25,000 tonne per year threshold. A failure to do so resulted in a late payment penalty equivalent to 130 percent of the carbon tax, ie $29.90 per tonne. A further failure to pay a late payment penalty resulted in an additional 20 percent being added to that figure. So far, four companies have not met that deadline. In all likelihood, come 3 February 2014, those companies will still have to pay their remaining 25 percent liability, regardless of the outcome of the next election, as:
- in the absence of a definitive statement on the matter from the opposition, the general view is that the Government is unlikely to give up the amount of revenue the carbon tax will generate, particularly in a budget deficit year and in the face of the mining super profits tax failing to yield the anticipated millions of dollars revenue expected;
- should the Abbott-led Coalition win power, any repeal of the carbon tax will likely take some time. Opposition Climate Change spokesman Greg Hunt indicated his party’s aim is to repeal the carbon tax within six months. The remaining 25 percent liability will fall due under five months. Any legislation to repeal the carbon tax will need to be drafted, debated before Parliament and supported by the Senate before being passed; and
- if the Rudd Labour Government remains in power, the current carbon tax which originally was set to be fixed for a three year period, will be reduced to a two year period, before converting to an emissions trading scheme from 1 July 2014. Liability for the carbon tax will remain in place until then.
Unless there is a successful High Court challenge to the carbon tax (and currently there is one such challenge before the High Court) whereby the High Court grants an injunction to the successful applicant suspending the operation of the carbon tax, it is unlikely that companies will be able to escape liability for the remaining 25 percent due on 3 February 2014.
We will keep you up to date with how this scenario progresses.