Farmers that make money by selling carbon credits will receive a tax break, a key measure the Nationals say they secured in return for supporting the government's net zero by 2050 target.
Federal Agriculture Minister David Littleproud said the tax concessions, estimated to be worth $100 million over four years, were one of the measures the Coalition partner requested in return for its support of the climate target.
Mr Littleproud said revenue raised from the sale of carbon credits and biodiversity certificates would now be treated as primary production income for tax purposes.
The changes would also allow farmers to contribute the profits from selling credits — known as Australian Carbon Credit Units (ACCUs) — into farm management deposits, a scheme intended to help farmers average their incomes.
"This will make farmers more resilient through tougher times from drought and floods and cyclones," Mr Littleproud said.
Mr Littleproud did not say how many farmers he expected would take up carbon farming as a result of the tax incentive.
"There's hundreds right across the country already in carbon farming.
"There is a complexity of getting into it, particularly if it's part of the Emissions Reduction Fund, and so there should be, because if those carbon credits don't have veracity then they're not worth the paper they're written on."
The tax incentive will come into effect from July 1 and will apply to carbon credits accredited under the Emissions Reduction Fund.
It comes as the government is expected to announce the outcome of a consultation about a proposal to change the law to give the agriculture minister the right to veto some carbon farming projects.
The government has proposed giving the agriculture minister the power to knock back any native vegetation projects under the Emissions Reduction Fund that cover 33 per cent of a farm or more.
The federal government committed Australia to reducing carbon emissions to net zero by 2050 last October after protracted negotiations with the Nationals.
The junior Coalition partner secured unknown commitments in return for its support.
