How will the Carbon tax  affect you? Your questions answered.

Firstly what is a carbon tax? It is A flat charge of $23 per tonne of emissions levied on the top polluters. It is designed to change energy use and encourage investment in clean energy sources such as solar, gas and wind. In 2015, the tax will be replaced with a market-driven system, referred to as an Emissions Trading Scheme.

Who actually pays the tax? Only the nation's top 500 polluters, half the number originally planned. This is partly due to the government's decision to exclude fuel from the scheme. In total, 0.02 per cent of Australia's 3 million businesses will be taxed. Fuel suppliers and distributors and companies emitting synthetic greenhouse gases, including the refrigeration and air-conditioning industries, are exempt.

Where does the money go?. The government has promised 90 per cent of households will be compensated in some way, with 70 per cent fully compensated either through tax cuts or increases to family payments. Pensioners will receive a rise, in line with cost of living increases. Money will also be allocated to high-polluting industries - such as coal - to help them move to cleaner energy practices.

When does it commence? If the Labor government wins the support of the Greens and the independents and passes its legislation, it will come into effect from July 1, 2012.

How will the carbon tax impact on your family?

The government has calculated that the average family will be $9.90 per week worse off as a result of the carbon pricing. However the average family will receive $10.10 per week in additional assistance, meaning that in theory there should be little or no difference.

Specifically, according to the government’s calculation, 4 million households will be better off, 6 million will break even, and around 8 million will be worse off. Realistically the impact on individual families will depend on their income and their spending patterns.

Firstly spending:

According to the government’s “Clean Energy Future Plan”:

•     Food is estimated to rise by less than $1 per week for typical households

•     Electricity costs are expected to rise by around $3.30 per week

•     An additional $1.50 per week on the average gas bill

•     Petrol at the bowser should not rise although holiday travel will probably rise as domestic aviation will be liable for the tax.

And compensation:

More than half of the carbon price revenue is being spent in compensation for households. There are two ways that households will receive assistance: through an increase in family payments that they may receive and via income tax cuts on top of these increases.

Family Payments –

Assistance will be provided to parents receiving Family Tax Benefit in two stages.

Firstly, families will receive an up-front lump sum advance in May-June 2012, while their regular Family Tax Benefit payments remain unchanged. This advance provides assistance for the period from the introduction of the carbon price on 1 July 2012 until 30 June 2013.

This  advance delivers a lump sum equivalent to a 1.7 per cent increase in the relevant maximum annual rate of FTB. For example, a family with a child aged 13-15 will receive a tax exempt Clean Energy Advance of $109.50 in June 2012. A family with a child aged under 13 years will receive around $85.

Then from 1 July 2013, families will receive assistance through a new fortnightly, tax-exempt supplement, equivalent of the advance outlined above.

Assistance for families will also include the introduction of a new Single Income Family Supplement from 1 July 2012 which will provide up to $300 to assist eligible single-income families who would receive little or no assistance through tax changes compared with dual income families with similar income. In addition, single-income families could also be eligible for up to $69 extra FTB B.

Income Tax Cuts –

The tax-free threshold will be more than trebled to $18,200 in 2012-13. Together with $445 of low-income tax offset, this means people on annual incomes of $20,542 will pay no net tax.

From 2015, the tax-free threshold will be further raised to $19,400. This will result in an additional one million workers who will not need to file a tax return.

This additional tax-free threshold will be balanced with changes in the marginal tax rate, and as a result of these changes:

• a person earning $20,000 a year will receive a tax cut of around $600, meaning that they will pay no net income tax
• a worker with annual income of around $25,000, will receive a tax cut of around $500
• most middle income earners will receive tax cuts of at least $300
• no person will pay more income tax.

For more information.While there are no details as yet on the Taxation Office or Family Assistance websites, the details of the government announcements can be found on the newly-launched Clean Energy website here. http://www.cleanenergyfuture.gov.au/ 

To calculate the impact on your individual situation, try the government’s “Household Assistance Estimator” here. https://www.cleanenergyfuture.gov.au/helping-households/household-assistance-estimator/