Carbon tax reporting: know your rights and responsibilities

Last week at the 2012 Australasian Carbon Expo in Melbourne, the government confirmed that Australia is ready to sign the next phase of the Kyoto Protocol, joining countries around the world that are taking action to combat climate change. The first commitment period ends on 31 December this year; a second commitment period to restrain greenhouse gas emissions will begin on 1 January 2013.

Greenhouse and energy reporting, and the Carbon Pricing Mechanism (or carbon tax) are complex and technical areas often hard for Australian businesses to understand. These areas are also changing rapidly, they are subject to political uncertainty, and the implications for businesses continue to increase. Along with the need to consider two possible scenarios up until the 2014 election to manage carbon emissions, managing the pass-through of carbon costs in the supply chain is one issue many companies are now dealing with.

The National Greenhouse and Energy Reporting Act (NGER) is a national framework for the reporting of information about companies’ greenhouse gas emissions, greenhouse gas projects, energy use and production. It also forms the basis of determining liability for the carbon tax, so will remain an important program. While companies have been reporting for several years now, NGER requirements are still evolving. Therefore, it is important for Australian businesses to continually check they are meeting requirements.

Financial assistance packages

There are various financial assistance programs available to help companies but many businesses are not aware of these.

Some of the programs businesses can leverage include:

• Jobs and Competitiveness Program (JCP) - $9.2 billion of assistance targeted at 40-50 ‘emissions-intensive, trade-exposed’ (EITE) industrial activities, such as steel, aluminium, zinc manufacturing.
• Energy Efficiency Information Grants program - $40 million program for small businesses (with less than $2 million annual turnover).
• Coal Sector Jobs Package - $1.3 billion of transitional assistance over six years to implement carbon abatement technologies in the most polluting coal mines.
• Steel Transformation Plan - $300 million worth of transitional assistance over five years to encourage investment and innovation in more efficient and environmentally friendly practices in steel.
• Energy Security Fund - $5.5 billion to be used for negotiating the closure of 2000 MW of highly polluting power generators and provide cash assistance and free permits to companies who develop clean energy plans.
• Carbon Farming Initiative - Australian farmers can participate in the carbon market through provision of carbon offsets.

Record keeping

Record keeping is an important requirement of the NGER system. Similar to documenting the accounting policies applied when reporting a company’s financial results and maintaining audit trails, businesses should be documenting the preparation of their NGER report and the assumptions used or decisions made. This is often in the form of a ‘basis of preparation’ document. There are some severe penalties for not complying with NGER requirements, including CEO personal liability where reasonable steps were not taken to prevent a breach.

One of the main differences in greenhouse auditing is the need to draw on multiple parts of the organisation in determining reporting boundaries and preparing a NGER report. This may include legal, engineering, IT and finance departments.

*Tim Pittaway is an experienced audit and assurance services principal at RSM Bird Cameron. He has more than 13 years’ specialist experience in the provision of internal audit, risk management, compliance audit, market audit, climate change and alliance audit services.