Refunds for carbon budget compliance
The 2025 Taxation Laws Amendment Bill provides for refunds of taxes paid on greenhouse gas emissions exceeding the mandatory carbon budgets allocated to companies by the Department of Forestry, Fisheries and the Environment (DFFE) if companies comply with the five-year carbon budget. Stakeholders thought that the wording of the proposed Section 17A(2) of the Carbon Tax Act, 2019, on the carbon budget refund, which refers to “the immediately preceding tax period”, was unclear and created uncertainty regarding which tax period is meant. To provide policy certainty to taxpayers and remove any ambiguity in the legislation, it is proposed that the reference to the immediately preceding tax period be deleted.
Furthermore, it is proposed that the legislation clarify that a refund may be claimed in the third year for the first two tax periods and for the remaining tax periods. Therefore, from year three to five, and over the five-year carbon budgeting period, a refund may be claimed in the sixth year. This will address concerns about inaccuracies in the emissions and tax liability assessments for the first two tax periods and the five-year carbon budgeting period. The proposed amendments will come into effect on a date to be determined by the Finance Minister.
Carbon Tax thresholds for 1A4a activities
Commercial and institutional sector entities have invested in backup diesel generators to address concerns about load shedding and electricity supply shortages. The generators are mainly used during supply disruptions for short periods of time, and the additional capacity is not fully utilised.
Stakeholders are of the view that the cost of complying with the Carbon Tax is significantly higher than the tax liability of companies falling within this sector. To ease the compliance burden on companies, it is proposed that the capacity-based threshold for the commercial/institutional activity (Intergovernmental Panel on Climate Change code 1A4a) be replaced with an emissions threshold of 25,000 tonnes of carbon dioxide equivalent, effective from 01 January 2026.