Climate change is a tricky subject to discuss and it's effect on the climate much debated. But the carbon tax is very real, it is now here and it will affect all Australians.
It starts with a tax
From the 1st July 2012 around 500 of the biggest emitters of carbon pollution (carbon dioxide, methane, nitrous oxide and perfluorocarbons from aluminium smelting) will be required to pay a $23 tax, via a permit system on every tonne released into the atmosphere.
Industry categories affected include electricity generation, stationary energy producers, mining, business transport, waste and industrial processes.
While most taxable carbon pollution is directly tied and measurable against specific activity such as power generation, the mining industry will also have to deal with fugitive emissions - greenhouse gasses released through the mining process (excepting those from decommissioned coal mines).
The $23 per tonne is to be indexed to inflation and will rise to $24.15 in 2013-10 and $25.40 per tonne in 2014-15. From the 1st July 2015 the price paid per tonne will be set by the market via a cap and trade system.
A number of industrial activities such as steel, aluminium, cement, zinc and some manufacturing will be eligible to receive trade-exposure based assistance. The Gillard government is clearly selecting winners in this process, as support for steel, aluminium, zinc, pulp and paper products may be as high as 94.5% percent of industry averaged carbon costs.
A price on carbon will not apply to fuel for off-road and on-road light transport by agriculture, forestry and fisheries. Households and small business will also be exempt from a carbon price on fuel. Although a 6c reduction in the off-road diesel fuel rebate will cause general pain for junior miners and for rural and regional business. There will also be a delay in the application of a carbon price on heavy on-road transport.
Additional funds will also be provided to selected industries to increase their energy efficiency and to assist in migrating to cleaner technologies. For other industries such as housing, air travel, freight, tourism or the traditionally carbon intensive activities such as coal or LNG extraction then the picture is significantly bleaker.
A number of new federal government bodies will be established and funded to oversee the carbon tax implementation, including a Climate Change Authority, which will advise the government on carbon tax implementation and a Clean Energy Regulator, established to administer the scheme.
In addition a newly formed Clean Energy Finance Corporation will invest $10 billion dollars over 5 years in new clean energy technology, while the Australian Renewable Energy Agency will consolidate $3.2 billion in existing federal programs to fund renewable energy projects. There are also a raft of other compensation and development funds focused on biodiversity, low carbon agriculture, small business grants and support for indigenous communities.
The costs
The Gillard government has indicated that more than half the money raised from polluters will be used to support low and middle income households to cover the increase in prices that business will pass on to consumers.
The government has also acknowledged that around 3 million households would suffer some financial pain at the hands of the carbon tax, 2 million would be no worse off and 4 million households better off.
Aside from those directly affected by job losses this dividing line between winners and losers is largely income dependent. A financial disadvantage starts around $80,000 per year for singles and single income families and $110k for dual income families (depending on the number of children).
Treasury has estimated that the average family will see an increase in weekly costs of $10, rising to $13.40 by 2015-16. Treasury also expects that the implementation of a carbon tax will cause an initial yearly rise of 0.7 per cent increase in the consumer price index (CPI).
The government estimates that a $200 trolley of groceries would be 80c dearer due to the carbon tax, however households that have a heavier than average carbon footprint will certainly face significantly higher bills. In particular the regular use of air conditioners, dishwashers and washing machines will challenge family budgets. It is estimated that residential electrical prices will be increased by the carbon tax by at least 10% between 2013 and 2017.
You can judge the affect of the carbon tax on your own situation by using the governments household assistance estimator.
A tax cut for those under $80,000
While no carbon tax is directly collected from households, the government has identified that tax reform is crucial to supporting low and middle income earners deal with the impact of the carbon tax.
From the 1st July 2012 the tax free threshold will be trebled from $6,000 to $18,200 and when combined with the low income tax offset (LITO - reduced from $1,500 to $445), there is effectively no net tax until income exceeds $20,542. In 2015-16, the tax free threshold will be increased to $19,400, to provide assistance for the projected carbon price out to 2019-20.
For income between $18,201 to $37,000 the marginal rate increases from 15% to 19% and from $37,001 to $80,000 it increases from 30% to 32.5% and subsequently 33% in 2015-16.
The government has stated that taxpayers below $80,000 will receive a tax cut from 1 July 2012, with most getting a cut of at least $300.
Increase in pensions, allowances and family payments
The federal government has stated that 4 million households will get assistance worth 120% of the expected carbon price impact. This permanent payment assistance will start from May-June 2012.
The government has also indicated that payment assistance will automatically rise to keep pace with the cost of living. This includes any price impacts that stem from the introduction of the emissions trading scheme.
In summary:
- Pensioners and self-funded retirees (with Commonwealth Seniors Health Cards), will get up to $338 extra per year if they are single and up to $510 per year for couples, combined. Assistance to pensioners will be automatic and will start before the carbon price starts, through an advance payment of $250 for singles, and $190 for each member of a couple will be paid in May-June 2012
- Self-funded retirees with an income higher than $50,000 for singles, $80,000 for couples or $100,000 for couples combined (but seperated due to ill health) will not be eligible for assistance
- Families with two children will get up to $220 in extra Family Tax Benefit Part A, and other families will get up to $110 per child
- Families will get up to an extra $69 in Family Tax Benefit Part B
- Jobseekers will also be assisted with an amount equivalent to a 1.7 per cent increase in the maximum rate of Newstart Allowance, worth up to $218 for singles and $195 for each member of a couple. The Parenting payment single will also increase by an amount equivalent to 1.7 per cent of the maximum rate, which is an increase of up to $289
- People holding a Commonwealth concession card who have high home energy costs because they rely on essential medical equipment will also be able to claim a Essential Medical Equipment Payment of $140
- Some low-income households might not receive enough assistance through tax cuts or Government payments to offset their average expected cost impact under a carbon price. These households will be able to claim a new $300 annual Low Income Supplement
- Student allowances such as Youth Allowance, Austudy and Abstudy will increase by an amount equal to 1.7 per cent of the maximum rate. This is an increase of up to $177 for singles, more if they have dependent children.
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