Carbon Tax – compensation and finances

The Government announced details of the Carbon Tax package on 10 July and introduced a number of Bills into Parliament on 13 September 2011 in regards to the carbon tax or clean energy package. This includes a tax on large businesses and compensation payments to individuals to compensate for resulting increases in the cost of living. These Bills have now been passed through Parliament.

The carbon price (tax)

The carbon price (tax) will commence on 1 July 2012. It will commence with a fixed price for the first three years and then move to an emissions trading scheme (ETS) where the ongoing price is set by the market. 

The price (tax) will start at $23 per tonne of carbon pollution and will rise at 2.5% per annum in real terms until 1 July 2015 when the market-linked price commences. 

It is expected that around 500 businesses will be required to pay for their pollution. The aim is to encourage these businesses to reduce energy consumption and move to cleaner sources of energy. 

Some of the tax impost is expected to flow through to higher prices for consumers so the government has proposed to redirect over half of the tax collected to help with higher costs in living expenses. The tax collected will also be used to provide grants and other incentive programs to help with a transition to cleaner energy. 

The compensation measures

The table below provides a summary of the compensation measures. They will generally commence from 1 July 2012. 

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Client group

Compensation measures

Taxpayers
  • Lower tax if income is less than $80,000 a year

Centrelink/DVA recipients
  • Clean Energy Advance – one-off payment in May/June 2012
  • New Clean Energy Supplement  - cash bonus paid quarterly from March 2013
  • Tax rate changes including higher SATO/Pension bonus

Self-funded retirees – hold Commonwealth Seniors Health Card (CSHC)
  • Clean Energy Advance – one-off payment in May/June 2012
  • New Clean Energy Supplement  - cash bonus paid quarterly from March 2013
  • Tax rate changes including higher SATO

Self-funded retirees – do not hold the Commonwealth Seniors Health Card (CSHC)
  • Lower tax if income is less than $80,000 a year

Carers/ disabled
  • Essential medical equipment payment
  • Centrelink/DVA and tax concessions, if eligible

Small businesses
  • Increase in instant deduction limit to $6,500 (from already proposed $5,000)

Aged care facilities
  • Will receive half of the Energy Supplement as either a new subsidy or higher fee payable by recipients who receive this supplement

Families
  • FTB increases (paid as Clean Energy Advance/Supplement)
  • Single income family supplement
  • Lower tax if income is less than $80,000 a year
Last updated 15 November 2011

Disclaimer

The information contained in this publication is based on the understanding Strategy Steps Pty Ltd ABN 14130045242 AFSL 333649 has of the relevant Australian legislation as at the date shown in this publication. The information contained in this publication is of a general nature only and is intended for use by financial advisers and other licensed professionals only. It must not be handed to clients for their keeping nor can any copies of sections of this publication be given to clients. Strategy Steps is not a registered tax agent under the Tax Agent Services Act 2009. We recommend that your client be referred to their registered tax agent or legal adviser prior to implementing any recommendations that you may make based on the information contained in this publication.