Australia: Overview of the Carbon Tax Scheme

Moore Tax News
Last Updated: 15 July 2011
Article by Stephen O'Flynn

Overview of the Carbon Tax Scheme

  • The Government has proposed to introduce a Carbon Tax scheme from 1 July 2012. The new legislation will put on a price on carbon in a bid to reduce Australia's carbon pollution.
  • The carbon tax will be targeting the nation's top polluters by requiring them to pay a fixed price of $23 per tonne of carbon pollution released into the atmosphere.  It is estimated that around 500 businesses will be affected initially.
  • The fixed price will increase by  2.5% annually in line with real world inflation, over a three year period:

2012-2013

2013-2014

2014-2015

$23 per tonne

$24.15 per tonne

$25.40 per tonne

  • From 1 July 2015 the carbon price will be set by the market under an emissions trading scheme

Small Businesses

  • Small businesses with less than $2 million turnover a year will not be subject to the carbon tax and will not need to monitor their carbon pollution or electricity usage.
  • In addition,  an increase in the small business asset write-off threshold will be increased for depreciable assets purchased after 1 July 2012:

2011-2012

2012-2013

$5,000

$6,500

  • The Government will provide assistance through the provision of advice on energy efficiency opportunities and increase funding for business programs such as the $1.2 billion Clean Technology Program, to aid small to medium businesses in their energy efficiency.
  • The Government will also establish a $40 million Energy Efficiency Information Grants program, to aid small to medium businesses and community organisation on practical ways to reduce their energy costs.
  • In addition the Government will provide an extra $5 million in funding over the course of four years to improve the delivery of clean technology advice and other non-grant business support programs.
  • In response to the introduction of the Resource Super Profits Tax on 1 July 2012, the Government has announced it will reduce the company tax rate from 30% down to  29% for 2013-2014 and 28% for 2014-2015. In addition, small businesses will be given a head start by being able to utilise the reduced 28% company tax rate from the 2012-2013 financial year.

Agriculture and Land Sector

  • The carbon tax will not be applied to agricultural and land sector emissions.
  • The Carbon Farming Initiative will provide opportunities for economic rewards for farmers and landholders who take steps to reduce their emissions. Credits will be created for each tonne of carbon pollution that can be stored or reduced on the land. These credits can then be sold to businesses for their own offset of carbon pollution.
  • $429 million will be funded over the course of six years towards The Carbon Farming Futures program, which will help farmers and land holders benefit from the financial opportunities that the Carbon Farming Initiative create.

Fuel Tax Credits

  • Fuel tax credits will be reduced for businesses from 2012-2013, however businesses in agriculture, fisheries and forestry industries will be exempt.
  • In addition heavy-on-road vehicles such as semi-trailers will be initially exempt from the fuel tax credit reductions but will apply the reduction from 1 July 2014.
  • Gaseous fuels consisting of LPG, LNG and CNG used for on-road transport will not be subject to a carbon price as their eligibility for fuel tax credits is reduced to zero as a result of the Road User Charge.

Households

  • The Treasury predicts prices for the whole economy to rise by 0.7%, therefore households  will pay on average $9.90 a week more.
  • Average household costs that will increase through the scheme are:

2012-2013

Electricity

Increase by $3.30 a week

Gas

Increase by $1.50 a week

Petrol/ Diesel

No carbon tax for passenger cars and other light on-road vehicles

Domestic Airfares

Domestic airfares will increase on average $3.50 per flight*

  *Sourced from QANTAS Australia

  • Businesses are expected to pass on their increased costs to consumers in regards to goods and services.
  • To assist households with  increased living costs, the Government will provide tax cuts and an increase in pensions, allowances and benefits:

Statutory and Effective Taxation Rates

2011-2012 (Current)

2012-2013 (Proposed)

2015-2016 (Proposed)

Threshold

Marginal Rate

Threshold

Marginal Rate

Threshold

Marginal Rate

0-$6000

Nil

0 - $18,200

Nil

0-$19,400

Nil

$6001-$37,000

15%

$18,201-37,000

19%

$19,401-37,000

19%

$37,001-$80,000

30%

$37,001-$80,000

32.5%

$37,001-$80,000

33%

$80,001-$180,000

37%

$80,001-$180,000

37%

$80,001-$180-000

37%

$180,001

45%

$180,001+

45%

$180,001+

45%

  • The Government will increase the Low Income Threshold from the current $6,000 to $18,200 for the financial year ending 2013 and up to $19,400 for the financial year ending 2016:

2011-2012

2012-2013

2013-2014

2014-2015

2015-2016

Low Income Threshold

$6,000

$18,200

$18,200

$18,200

$19,400

  • Consequently the low-income tax offset (LITO) will decrease as it will be replaced with the increase of the low income threshold:

2011-2012

2012-2013

2013-2014

2014-2015

2015-2016

Low Income Tax Offset

$1,500

$445*

$445*

$445*

$300^



* LITO will phase out at the rate of 1.5% from $37,000 (Currently 4% from $30,000).
^LITO will phase out at the rate of 1% from $37,000.

  • Based on the proposed increase of the low income threshold to $18,200 coupled with the low-income tax offset of $445, individuals would be able to earn an annual income of up to $20, 542 before any income tax is payable.  From 1 July 2015 this annual income threshold will increase to $20,979.
  • The Government will also contribute $330 million in funding towards the Low Carbon Community Program, which will help communities and councils to improve their energy efficiency and will also be extended to low income households to help reduce their energy costs.

Family Tax Benefit increases:


May – June 2012

1 July 2013

   -      Families will receive an up-front lump sum and their Family Tax Benefit payments will remain unchanged  

   -      Families will receive assistance through a new fortnightly tax exempt supplement which will be equivalent to a 1.7% increase in the relevant maximum annual rate of FTB

   -      The lump sum will be equivalent to a 1.7% increase in the relevant maximum annual rate of FTB

   -      Introduction of a new Single Income Family supplement from 1 July 2012 will provide up to $300 for eligible single income earning families

Pensions and Allowances:


May – June 2012

20 March 2013

   -      Pensioners and allowees will receive an up-front tax exempt lump sum

   -      Pensioners and allowees will receive assistance with their regular payments through a new fortnightly tax-exempt supplement

   -      The lump sum will be equivalent to a 1.7% increase in the annual maximum rate of their pension  

   -      The lump sum will be equivalent to a 1.7% increase in the annual maximum rate of their pension  and indexed to CPI

Self Funded Retirees:


May – June 2012

20 March 2013

   -      Those with Commonwealth Seniors Health Cards will receive an up-front lump sum and their regular payments will remain unchanged  

   -      Commonwealth Seniors Health Card holders will receive assistance through a quarterly tax exempt supplement  

   -      The lump sum will be $250 for singles and $190 for each member of a couple  

   -      The supplement will be equivalent to a 1.7% increase in the maximum rate of the pension and indexed to CPI


May-June 2012

1 July 2013

   -      Students and jobseekers will receive an upfront lump-sum payment

   -      Students with Youth Allowance, Austudy and Abstudy will receive an increased amount equivalent to 1.7% of the maximum rate

   -      An increase of up to $177 for singles and more should they have dependent children

   -      Job Seekers will receive an increased amount equivalent to 1.7% of the maximum rate of Newstart Allowance

   -      An increase of up to $218 for singles and $195 for each member of a couple

  • Households that can display they still require further assistance after the tax cuts and Government payments may be eligible for an annual tax –exempt 'Low Income Supplement' of $300.
  • The Government is also planning the introduction of the "Essential Medical Equipment Payment". The payment of $140 per year will assist eligible people who require extra unavoidable electricity costs due to medical conditions or disabilities and possess a relevant concession card.

To calculate an estimate of your household assistance, the Government has released a Household Assistance Estimator which can be accessed at: https://www.cleanenergyfuture.gov.au/helping-households/household-assistance-estimator/

Author:  Stephen O'Flynn, Moore Stephens Melbourne

For further details or advice about how the Carbon tax will affect your business please contact Stephen O'Flynn or your Moore Stephens Relationship Partner.

This publication is issued by Moore Stephens Australia Pty Limited ACN 062 181 846 (Moore Stephens Australia) exclusively for the general information of clients and staff of Moore Stephens Australia and the clients and staff of all affiliated independent accounting firms (and their related service entities) licensed to operate under the name Moore Stephens within Australia (Australian Member). The material contained in this publication is in the nature of general comment and information only and is not advice. The material should not be relied upon. Moore Stephens Australia, any Australian Member, any related entity of those persons, or any of their officers employees or representatives, will not be liable for any loss or damage arising out of or in connection with the material contained in this publication. Copyright © 2011 Moore Stephens Australia Pty Limited. All rights reserved.

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