As of Tuesday 8 November 2011 Australia will be getting a carbon tax. The package of 18 bills to introduce the tax, and provide assistance to low and middle income earners and some industries, was passed by the Senate in a lunchtime vote 53 – 47.
What will it mean for you?
As we outlined in our previous blog post on the carbon tax, it is what it says it is – a tax on carbon paid by the companies who produce it.
From July 1, 2012 the 500 biggest polluters in Australia will pay $23 for every tonne of carbon they release into the atmosphere. The rate will gradually increase until July 1, 2015, when it will become set by the market and will no longer be a carbon “tax” but will be emissions “trading scheme”. The main exclusions are household fuel and agricultural emissions.
The cost of the carbon tax to these polluters is intended to drive them to implement “cleaner” processes. It is also intended that these costs will be passed on to consumers – so that consumers reject products that carry the on-cost of the carbon tax and switch to those that don’t.
Let’s look at what the additional costs are forecast to be for consumers.
Treasury estimates that the average family will pay $9.90 more a week in the year the tax is introduced. That is split $3.30 between electricity increases (10 per cent), $1.50 to gas (9 per cent) and 80 cents to food (less than 0.5 per cent). The overall impact is forecast to be a 0.7 per cent price rise.
The additional costs will also be passed on to business consumers by way of increases in the cost of electricity and other business inputs. There is no direct compensation package for business, as they will pass additional costs on to consumers, and consumers have been compensated.
Now let’s look at the compensation provided for consumers:
Consumers will be compensated through the tax system as follows:
- Tripling of the tax free threshold from $6000 to $18,200. It is stated that this will remove 1 million people out of the income tax net, and that those taxpayers on less than $80,000 will pay an average $300 less tax.
Further, retirees and family tax benefit recipients will also be compensated as follows:
- One-off payments of up to $250 (singles) to those who have a Commonwealth Seniors Health Card and a quarterly seniors supplement of up to $338 (again singles).
We are told that this is an average $10.10 of assistance.
Carbontax.net.au has a facility for you to do your own calculations on its “household compensation calculator”. The calculator provides 43 predetermined scenarios, estimating your benefits and assuming you have average consumption patterns. However, it obviously cannot factor in any variations you may make to your consumption patterns and what changes you may make in the products you use etc.
From a tax planning perspective, have a think about how you can make (however small) an advantage from the tax changes:
- Incur all the tax-deductible expenses you can before the tax-free threshold increases on July 1, when you’ll get more benefit.
- Delay any income you can until after the increase.
If you have any queries or you would like to discuss, please comment below, or email me at kaylene@cabel.com.au
Kaylene Hubbard
Senior Tax Consultant
CABEL Partners
