The first thing to remember about the carbon tax is that it’s not a direct tax – it doesn’t come out of your pay or appear as an item on your shopping docket.
It’s levied on 400 to 500 businesses which emit a lot of carbon dioxide and they have the option of cutting their emissions or paying for them and passing on that cost through price rises.
How the carbon tax affects you will depend on factors including relationship status, parental status, age and income.
With the federal government’s carbon tax legislation expected to pass the lower house of Parliament on Wednesday, and pass through the upper house this year, Australians can expect three changes in July 2012:
– the imposition of a price on carbon emissions;
– changes to some income tax rates;
– a suite of compensation payments from government.
There’s also a proposed assistance package to industry, though that is not directly relevant to households.
The government says that nine out of 10 households will get assistance to counter the effects of the carbon tax.
According to its figures, the estimated average cost impact is $9.90 a week, while compensation is $10.10 a week.
The household impact of the tax, before any compensation, ranges from $2.25 a week ($117 a year) for an individual receiving $12,700 in government benefits, to $19.80 a week ($1031 a year) for a couple who have one child and earn $100,000 each a year.
An individual on $200,000 a year will pay about $18.30 a week ($951 a year) – and won’t receive compensation.
Compensation will be delivered via tax changes and increased government payments.
Under the tax reforms, everyone’s tax-free threshold goes up to $18,200 from $6,000 from July 2012 (and up to $19,400 in 2015).
Not everyone gets the full benefit, however, as the tax rate for income between $37,000 and $80,000 creeps up from 30 per cent to 32.5 per cent.
Further changes to help low- and middle-income earners will come through changes to the Low Income Tax Offset.
The compensation payments will be made to parents, pensioners, students on Austudy and Abstudy and jobseekers on Newstart Allowance through increases in government benefits.
For parents, all families receiving Family Tax Benefit A will get an increase of at least 1.7 per cent, worth up to $110 per child a year depending on their circumstances.
Families receiving Family Tax Benefit B will get assistance equal to a 1.7 per cent increase in the maximum rate, worth up to $69 a year.
Below is a list of post-July-2012 outcomes as a result of the carbon tax package:
Singles: The July 2012 changes for singles earning over $25,000 a year all arise from changes to income tax thresholds, as other compensation is made through government payments such as child benefits and pensions.
The carbon tax starts reducing income once you’re earning over $50,000 a year – although at $50,000 it’s $1 a week.
At $70,000 a year (just over the average national full-time income of about $68,000), the carbon tax will cost an estimated $126 extra a year.
Couples: a dual income couple with no kids can earn up to $110,000 between them before the impact of the carbon tax starts to exceed the compensation from tax reform.
A couple earning $60,000 each will pay an extra $50 a year.
Parents: For a couple on one income of $70,000 with one child under five, the changes will mean they should be around $60 a year worse off.
A couple with one income of $70,000 and two children under five have the impact fully offset and, according to government figures, will be about $30 a year better off.
Dual income couples with a young child, who earn $100,000 between them, have the impact fully offset.
Couples earning $140,000 between them, with a young child, will pay $230 a year extra.
Single parents who earn $45,000 a year and have a child under five can expect to be nearly $1,200 a year better off.
Single parents earning $70,000, with a child under five, are about $30 a year worse off.
Seniors: Single seniors on $50,000 a year have the impact of the carbon tax fully offset and receive additional compensation of about $400 a year.
Couples earning each earning $25,000 are about $790 better off a year.
Government payments, in the form of lump-sum advances to cover the 2012/13 financial year, will be made from May next year, before the carbon tax takes effect, with regular fortnightly payments to be increased from 1 July 2013.
Detailed lists of household outcomes are available in the Supporting Australian Households document here (listings start from page 17): http://www.cleanenergyfuture.gov.au/wp-content/uploads/2011/07/supporting-australian-households.pdf
