Low and middle-income families and singles pensioners and other welfare recipients are the biggest winners from the carbon price while those on generous incomes will bear almost the full brunt with next-to-no assistance.   

Unveiled at midday today by the Prime Minister, Julia Gillard, a package of $15 billion in tax cuts and increased benefits mean 4 million households will receive more in compensation that the carbon tax will add to their cost of living.   

A further 2 million households will be no worse off by being fully compensated, while another 2 million will receive something.   

The Prime Minister Julia Gillard chaired today's meeting of the Multi-Party Climate Change Committee with, from left, Ross Garnaut, Wayne Swan, Greg Combet and Mark Dreyfus.



Of the nation's 8.8 million households, only 700,000 receive nothing.

The scheme will operate as a fixed carbon price of $23 from July 1 next year, and move to a full emissions trading scheme on July 1, 2015, when the market will set the carbon price.

It excludes petrol and is not revenue neutral as first forecast. It will cost the budget $4.2 billion over four years and will erode the forecast $3.5 billion return to surplus in 2012-13 by $530 million

The increases to the cost of living, estimated to be 0.7 per cent, will result from the nation's top 500 polluters passing on their costs of having to pay for the carbon dioxide they emit.

Figures released today show the average hits to households will be $9.90 a week, or $515 a year, whereas average assistance will be $10.10 a week, or $525 a year.

Electricity will rise by $3.30 a week, gas by $1.50 a week and food bills by an average 0.80c a week.

The tax cuts, worth $8 billion, will result in 60 per cent of earners receiving an annual tax cut of at least $300, or about $6 a week.

The tax cuts will operate by lifting the tax-free threshold from $600 to $18,200 on July 1, 2012, and to $19,400 in 2015.

This will remove 1 million people from the tax system and be worth $600 a year from somebody on $20,000, and $303 for somebody on $65,000.

On incomes over $80,000 the tax cuts disappears to $3 a year, or 6c a week.

For example, a single earning $85,000 will receive $3 a year from the tax cuts but face a $463 increase in the cost of living.

Family circumstances vary widely depending on the number of children, whether thee are one or two salary earners, how much each earns and total income earned.

For example, couples on dual incomes of up to $95,000 a year with one child aged five and another 12, will be better off. The family will receive $759 a year in assistance – combined tax cuts ad family benefit supplements - whereas the impact of the carbon price will be $615.

The same couple earning $100,000 will be fully compensated.

Families on combined incomes of up to $200,000 can still receive compensation if one of the income earners earns less than $80,000 and qualifies for the tax cut.

However, a family on $180,000 combined or more, and not eligible for either tax cuts or family benefits, receives only between $3 and $6 a year and faces an average increase in the cost of living of around $1000.

Pensions, family tax payments, the dole, student allowances and other benefits will increase by 1.7 percent a year.   

The first-full year benefit will be paid as a lump sum in May and June next year, before the carbon price starts and then in fortnightly instalments from 2013 onwards..

This will amount to $338 for a single pensioner, $110 per child for a family which receives Family Tax Benefit Part A, $69 for a family which receives benefit Part B

As promised, fuel used by motorists, small business vehicles and tradespeople will be exempt for good.

So too, will be diesel and other transport fuels used in the agriculture, fisheries and forestry.

Other heavy on-road transport – vehicles weighing over 4.5 tones - will not be exempt and will pay a effective carbon tax on fuel by having the reductions in excise it currently receives being clawed back. But this clawback will not start until July 1, 2014, providing temporary reprieve for truckies.

Off-road heavy vehicles, predominantly those used in the mining sector, will have their excise clawed back by about 6c a litre when the scheme starts on July 1, 2012.

Excise on aviation fuels will be increased to reflect the impact of a carbon price. These increases will add $930 million to aviation fuel bills over the first four years of the scheme. The clawback of excise reductions will save another $1.9 billion, meaning the total savings on fuel will be $2.8 billion.

This will help offset the cost to the budget which will still be a hit of $4.3 billion over four years.

Read more: http://www.theage.com.au/environment/15-billion-in-tax-cuts-for-low-and-middle-income-earners-under-carbon-deal-20110710-1h8in.html#ixzz1RgfVu0hm

I don't get why those on higher incomes recieve no benefit. If they increase the tax free threshhold surely everyone would pay less tax?

It sounds like this is actually a net tax cut, which is good, though there are plenty of handouts mixed in so it is hard to tell.

It's a shame they excluded petrol. It doesn't really help anyone to put all the pressure on the electricity sector and truckies. We are missing opportunities to easily reduce emissions.

I do not answer personal questions, sorry Andrei.  Those on higher incomes, do not need compensation.   

Its not the same for the unemployed, the low income workers.  They don't have anywhere near the same saving capacity, as those on higher incomes, for them its very hard to save and budget.   

Pensions, family tax payments, the dole, student allowances and other benefits will increase by 1.7 percent a year.   

If you're going to have a Carbon Tax it's probably best to do it properly and skip the compensation component entirely (okay, perhaps compensate pensioners).

I dunno, but the whole compensation thing seems to defeat the purpose of having the tax in the first place.

Life_goes_on wrote on Jul 10^th, 2011 at 6:50pm:



In an ideal world in an ideal socio-econo-political climate, this would be how things would go...

Unfortunately, harsh real-world realities dictate that compensation is part and parcel of overcoming the misleading scare campaigns of those with vested interests in politicising and trashing the Gillard Govt's worthwhile efforts to take Carbon Pricing steps in long-overdue transition arrangements...

If only...there was responsible bi-partisan support for this, eh!?

As for forcing change, the Govt's efforts need to be directed at 'incentivising' (in this case, taxing) those entities are the biggest high-carbon pollution culprits and therefore those entities who are most in a position to make significant changes in the way they do things...

It's not like consumers are in a position to readily identify and boycott many of the 500-odd biggest polluters!?

BTW, does anyone have a link that shows which polluters are on the list?

Quote:


But when Howard was doing this (handing out dosh) the ALP said it was vote buying.