By Matt Egerton-Warburton, Partner

As agricultural land values soar, a properly structured carbon project can assist farming families with succession issues while maintaining the integrity of the family farm businesses.

Well‑structured carbon‑farming projects – and the Australian Carbon Credit Units (ACCUs) they generate – are offering new ways for families to create liquid, off‑farm assets that can be distributed between heirs.

This article explores how carbon projects can be designed to support succession planning and related tax and legal considerations.

The challenge: Rising land values and intergenerational fairness

The national medium price for farmland tripled (yes tripled) in the decade leading up to 2024.

While this is generally great news for farming families, the rapid escalation of agricultural land values across Australia has created a new challenge for farming families – when organising farm succession how do you pass on a viable farming business to one child, while trying to ensure fairness to the other siblings?

As agricultural land values increase, the sibling who inherits the farm may receive a substantial financial windfall (at least on paper) while the “non-farming children” may receive much less.

When the family farm was worth $5–$10 million, keeping the farm intact and viable while treating all children fairly was difficult but manageable. The child who inherited the farm could typically finance a payout to siblings via a reasonable mortgage over the property.

Today, with land values frequently sitting in the $15–30 million range, and with higher interest rates, that solution is much less viable.  Farm operating profits simply cannot service the level of debt required to fairly buy out non‑farm siblings during a succession process.

Carbon projects as a succession tool

One emerging solution is the use of carbon‑farming projects to generate assets outside the core farming enterprise – assets that can be passed tax-effectively and fairly to non-farming children without jeopardising the viability of the farm.

When a carbon project is registered under the Emissions Reduction Fund, the persons establishing the carbon project (typically the farmer and a third-party carbon service provider) must nominate a “Project Proponent.”

The Project Proponent is the person (or company) that is legally responsible to the Clean Energy Regulator for carrying out the carbon project in accordance with both the legislation and the farm/forestry management plan submitted by the farmer. As the carbon project matures and carbon is sequestered or not emitted, over the 25 or 100 year life of the project, the Project Proponent receives ACCUs in their name (in an Australian National Registry of Emissions Units (ANREU) account) from the CER. Over time, a carbon project can generate Australian Carbon Credit Units (ACCUs) worth millions of dollars.

Here is the interesting part – the Project Proponent does not have to be the landowner or the farmer. It can be any entity (the farmer, the trustee of the family trust, the carbon service provider, a special purpose family vehicle, etc) as long as this entity has a contractual relationship with the landowner so they can enforce their obligations over the land.

Using carbon assets in an estate plan

With a properly structured project, the family has several options at succession:

• Transfer shares in the Project Proponent company – the shares can be left to the non-farming children through the will. Those children then hold a valuable asset linked to future ACCU issuance and trading, while the farming child receives the farm unencumbered.
• Transfer ACCUs directly – ACCUs owned by the project entity can be transferred to non-farming children as part of the estate distribution. ACCUs are personal property and can be gifted through a will like any other asset.
• Use ACCU revenue to fund equalisation payments – if the project is ongoing, the continuing issuance of ACCUs can generate revenue that helps fund staged equalisation payments without placing pressure on farm cashflow.

Succession planning advantages

If structured well, carbon projects can significantly reduce pressure on the farming successor by reducing or eliminating the need for high bank debt.  ACCUs, or interests in entities holding ACCUs, can be distributed over time, sold into the market, or held as long‑term appreciating assets. This approach provides:

• better liquidity for non‑farming heirs;
• continuity for the farming business; and
• reduced risk of forced sales.

Tax treatment of ACCUs: Key considerations

Before farmers set up a new entity to receive ACCUs, they should get specific tax advice to ensure that ACCUs delivered to non‑farm heirs carry minimal tax leakage.

Bringing ACCUs into a family succession or estate-planning structure – for example via a family company or trust owning the carbon project – can work, but the ability to access tax concessions will depend heavily on how the project is structured.  Establishing the right structure produces a tax-efficient asset to leave to non-farming children (or otherwise distribute via an estate).

There are tax concessions available to persons or entities that hold ACCUs who are engaged in a primary production business on eligible farmland.

Other important considerations include:

• ACCUs are generally treated as trading stock (primary production income) when generated in the ordinary course of business. They are revenue assets, not capital assets. That means they are not eligible for capital-gains tax concessions or discounts.
• Where ACCUs are issued to a project‑proponent entity rather than directly to the landowner, the tax liability goes to the project proponent.
• When ACCUs are disposed of (e.g. sold or transferred), the gross proceeds are typically assessable as income in the year of disposal. The costs incurred to become the holder (for example, application, certification, project start up) are typically deductible.

Conclusion

Carbon projects should be considered by farming families for several reasons. They can provide a new revenue stream, they can create environmental and productivity benefits and they can provide a useful, new, off-farm asset that can help with succession issues.

To capture the succession benefits, Mills Oakley is available to provide landholders with good tax and legal advice to align the carbon-asset structure with broader estate-planning objectives while preserving eligibility for concessional tax treatment.

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Matt Egerton‑Warburton is a Partner specialising in carbon projects and related legal issues. He advises farming families, agribusinesses, carbon service providers and other private and public clients. This article is commentary only, not legal or tax advice.

Matt published previously on “Carbon Project Agreements – Landholder Risks and Recommendations” here https://www.millsoakley.com.au/insights/carbon-project-agreements-landholder-risks-and-recommendations/

A version of this article was published in the Australian Farm Institute’s AFI Insights – full edition available at https://www.farminstitute.org.au/publication/december-2025-insights/