A carbon sink is a natural or artificial reservoir that accumulates and stores some carbon-containing chemical compound for an indefinite period. The process by which carbon sinks remove carbon dioxide (CO2) from the atmosphere is known as carbon sequestration. The Kyoto Protocol has raised government and public awareness of the significance of CO2 sinks as a form of carbon offset.

The Kyoto Protocol treaty came into force in 2005 and is a legally binding agreement under which industrialized countries will reduce their collective emissions of greenhouse gasses by 5.2% compared to the year 1990 (www.kyotoprotocol.com).

Since 1st July 2007 expenditure incurred in establishing trees in a carbon sink forest have been deductible. This deduction encourages the establishment of carbon sink forests for the dedicated purpose of carbon sequestration (i.e. having the trees absorb carbon dioxide from the atmosphere).

From 1st July 2012 the costs incurred in establishing trees for a carbon sink forest are deductible at the rate of 7% per year (i.e. written off over 14 years).

To claim the tax deduction all the following conditions must be met:

• Must be carrying on a business.

• The primary purpose of establishing the trees is carbon sequestration.

• The expenditure was not incurred under a managed investment scheme.

• The trees in the carbon sink forest meet certain forest characteristics and adhere to certain environmental and natural resource management guide-lines

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