ATO Class Rulings CR 2026/15 and CR 2026/16 trigger upfront Capital Gains Tax on NSW Biodiversity Stewardship Agreements

Overview of ATO Class Rulings on NSW Biodiversity Stewardship Agreements

The Australian Taxation Office published two Class Rulings on 28 May 2026 that settle a long-standing question of tax law for participants in the New South Wales Biodiversity Offsets Scheme. CR 2026/15 and CR 2026/16 confirm that entering into a Biodiversity Stewardship Agreement (BSA) under Division 2 of Part 5 of the Biodiversity Conservation Act 2016 (NSW) triggers CGT Event D4 under section 104-47 of the Income Tax Assessment Act 1997 (Cth). The capital proceeds are taken to be the market value of the biodiversity credits at the moment the BSA is executed, not at the point of sale or retirement. For landowners, developers, and ecological consultants operating in the NSW offset market, this ruling rewrites the financial mechanics of biodiversity credit generation.

The practical consequence is stark. A landowner who signs a BSA on a rural property in, say, the Liverpool Plains or the South West Slopes becomes liable for capital gains tax immediately upon execution of that agreement, even if it takes three, five, or more years to locate a buyer for the credits or to have those credits accepted by a development project. The cash-flow gap between a tax liability arising at execution and actual revenue being received at sale is the central problem the rulings create. This is not a theoretical concern: the NSW Biodiversity Offsets Scheme credit market is characterised by extended holding periods, limited buyer pools for certain ecosystem credit classes, and no centralised exchange with transparent spot pricing.

The rulings matter beyond the immediate tax question because they affect the supply side of the NSW offset market at a time when credit availability is already a constraint on development approvals. Ecologists, planners, environmental lawyers, and property advisors all need to understand the downstream effects of this ruling on feasibility assessments, credit pricing, and the viability of conservation agreements as a land management tool in New South Wales.

Key details of CR 2026/15 and CR 2026/16 and how CGT Event D4 applies to Biodiversity Stewardship Agreements

CGT Event D4, set out in section 104-47 of the Income Tax Assessment Act 1997 (Cth), applies when a landowner enters into a conservation covenant over land. The ATO’s position in both rulings is that a Biodiversity Stewardship Agreement constitutes a conservation covenant for this purpose. The capital gain is calculated as the difference between the capital proceeds and the cost base of the covenant. The capital proceeds are deemed to be the market value of the biodiversity credits created under the BSA at the time the agreement is executed. Critically, this is a deemed market value assessment: actual cash does not need to change hands for the tax liability to crystallise.

The timing of the CGT event is the feature of these rulings that most directly disrupts current practice. Under the NSW Biodiversity Offsets Scheme, biodiversity credits are created by the Biodiversity Conservation Trust (BCT) upon registration of a BSA. Credits are then held by the landowner and may be sold to a development proponent, retired voluntarily, or transferred into the Biodiversity Conservation Fund. The period between credit creation and credit sale can range from months to many years depending on credit class, location, and market demand. Despite this temporal gap, the tax liability under the rulings arises at the point of execution, not at the point of monetisation. This means a landowner could owe tens of thousands of dollars in capital gains tax in the financial year the BSA is signed, with no offsetting revenue in that same period.

The valuation challenge embedded in this framework deserves careful attention. The NSW biodiversity credit market is thinly traded, with significant variation in credit prices across different ecosystem credit types and geographic locations. Some credit classes trade infrequently enough that establishing a defensible market value at the date of BSA execution requires expert valuation rather than reference to observable transactions. The ATO’s deemed-value approach places the burden of establishing that market value on the landowner, creating both a compliance obligation and a dispute risk. If the ATO’s view of market value at execution differs from the landowner’s, the landowner faces the possibility of paying tax on a value they never realise in a subsequent sale, particularly if credit prices fall between execution and eventual sale.

For dual-track or credit-stacking arrangements, where a landowner seeks to generate both biodiversity credits under the NSW BOS and Australian Carbon Credit Units (ACCUs) under the Commonwealth Emissions Reduction Fund on the same parcel, the rulings add a further layer of complexity. Both credit streams have distinct tax treatment, timing, and regulatory requirements. The upfront CGT liability under CR 2026/15 and CR 2026/16 must now be modelled alongside ACCU income timing from the very beginning of feasibility analysis, not as an afterthought once the ecological and carbon assessments are complete.

Australian context: how these rulings interact with the NSW Biodiversity Offsets Scheme and national offset frameworks

The NSW Biodiversity Offsets Scheme, established under the Biodiversity Conservation Act 2016 (NSW) and operational since August 2017, is the largest state-based biodiversity offset framework in Australia by transaction volume. The scheme requires development proponents to offset impacts on biodiversity values either by retiring credits generated through BSAs or by paying into the Biodiversity Conservation Fund. The BCT administers the credit register and oversees stewardship agreement landholders. As at recent BCT reporting periods, thousands of hectares of private land are enrolled or under assessment for BSAs across New South Wales, representing a significant pipeline of potential credit supply that will now be subject to the tax treatment confirmed in these rulings. The financial implications for landowners at various stages of that pipeline — from those yet to execute a BSA through to those holding unsold credits already on the register — vary considerably, and professional advice will be essential to navigate the tax position in each case.

References and related sources

• Primary source: www.claytonutz.com
• ato.gov.au
• jws.com.au
• ato.gov.au
• EPBC Act

How iEnvi can help

iEnvi provides specialist consulting services relevant to this topic. Our team includes CEnvP Site Contamination Specialists with experience across contaminated land, groundwater, remediation, ecology, and regulatory compliance.

• iEnvi contaminated land investigation services
• iEnvi remediation and validation services
• iEnvi expert services and independent review services

This is an iEnvi Machete news summary. Prepared by iEnvi to summarise the source article for contaminated land, groundwater, remediation, approvals and site risk professionals.

Published: 28 May 2026

Need advice on this topic? Speak to an iEnvi expert at info@ienvi.com.au or 1300 043 684, or contact us online.