Spotlight on carbon farming accounting

Spotlight on carbon farming accounting

The government recently introduced amendments intended to allow concessional tax treatment on income generated from selling ACCUs

BDO‘s Andrew Jones, Partner, Corporate & International Tax, and Aletta Boshoff, National Leader, ESG & Sustainability, will explain the accounting implications of all the changes in just over a month at the Inaugural Nature-Based Solutions Conference & Expo. Here’s a preview of what they will present.


Decarbonisation and carbon credits

Since the Australian Government’s Climate Change Bill passed in September 2022, Australia’s emissions reduction target of 43 percent by 2030 and net zero emissions by 2050 are set in law.

Decarbonisation has rapidly shifted beyond a buzzword to something businesses take seriously, with renewed clarity of expectations. Increased pressure has also been placed on organisations, investors, and industries alike to accelerate decarbonisation plans. Unfortunately, there is no ‘one-size fits all’ approach to decarbonisation, and some will find it more straightforward than others.

There are several ways to reach this goal.

Organisations are likely to need to utilise multiple aspects of the carbon hierarchy in their decarbonisation process—that is, avoid, reduce, restore, or offset. In this last bucket, carbon credits play their part in offsetting emissions for organisations and industries that cannot decarbonise quickly.

Farmers, who control over 50% of the land mass are able to contribute using the carbon markets. The Governments Emission Reduction Fund has approved methods for both emissions reductions – from methane, and nitrous oxide for example, and sequestration (storage) of carbon into soils and vegetation.

Until now, income earnt from a ‘carbon farming’ activity has not been treated as primary producer income, which has restricted farmers’ leverage with the income.

What changes are coming to the ways a farmer can characterise a carbon credit income?

For individual primary producers, the Australian Government recently introduced amendments intended to allow concessional tax treatment on income generated from selling Australian Carbon Credit Units. The amendments are expected to become law shortly.

The existing accounting standards didn’t anticipate carbon credits, so accounting for them is an evolving space.

An important consideration in the ongoing discussions in this space looks to take into account the intended use of the offset,
i.e. will it be used by the producer to offset their other emissions, or is it intended to be sold to a third party as an asset?

Each of these has tax implications which will be explained in the accounting presentation.

Sustainability reporting is on the horizon

Banks, investors, supply chains, and partner organisations will likely be interested in sustainability-related information from organisations of all sizes as they calculate carbon footprints or even assess and minimise risks. This means that supply chain participants will likely need to adopt IFRS S2 in any event.

What does this mean for farmers?


Accounting may be one of the least glamorous but necessary parts of running the farm business. Like mounting a carbon project, it relies on having a good understanding and keeping accurate records. Get your head around carbon farming and accounting next month at the conference!





Three or more delegates from any one farm or organisation can attend at Earlybird rates. Get plain-English, farmer-focused carbon market knowledge delivered by experts at the inaugural

Nature-Based Solutions Conference & Expo

Monday 17–Wednesday 19 July 2023