Updated November 12th 2013

Whether you believe the science or not, the federal government has proposed the introduction of a carbon tax scheme from 1 July 2012.

Under the planned scheme a carbon tax would be introduced at $23 per tonne, rising 2.5% annually and moving to a market based emissions trading scheme in 2015. The scheme will directly target the top 500 corporate emitters in the country.

The carbon tax is effectively aimed at increasing the price of goods produced by carbon intensive industries in order to initiate change in both consumers and businesses. Businesses impacted by the scheme will initially be required to purchase permits from the government equivalent to the quantity of carbon pollution that they have released.

A large portion of the government’s new Clean Energy Future plan is based around compensation. In order to give effect to the carbon tax and to make it more politically palatable, the scheme contains numerous concessions to individuals, small businesses and industry.


Treasury modelling predicts that prices for the economy are to rise by 0.7%. Based on these figures it is estimated that the average household will pay $9.90 more a week. Goods and services are likely to increase as businesses are expected to pass their increased costs on to the consumer.

The federal government has indicated that it will be providing compensation to tax payers through increases in the tax free threshold and some marginal tax rates. These measures will take effect from 1 July 2012. The changes are illustrated in the below table.

Based on the proposed increase of the low income tax threshold to $18,200 and the low income tax offset of $445 individuals will effectively be able to earn an annual income of $20,542 before any income tax is payable. From 1 July 2015, this annual income threshold will increase to $20,979.



In line with the government’s $15 billion compensation package individuals can also expect the following tax benefits:

  • Up to $110 per child for a family that receives Family Tax Benefit Part A
  • Up to $69 extra for families that receive Family Tax Benefit Part B
  • Up to $218 extra per year for single income support recipients and $390 per year for couples combined for people on allowances
  • Up to $234 per year for single parents in addition to the increased family payments they receive


More than 3 million Australian pensioners will receive household assistance to help them with the increased living costs as a result of the introduction of a carbon price.

Under the new scheme, pensioners are due to receive an increase of 1.7% on their tax exempt pension. This will equate to $338 extra per year for single pensioners and self-funded retirees and up to $510 per year for pensioner couples combined. This assistance will be paid in line with regular pensioner’s payment cycles from 20 March 2013.

In addition to these increases, pensioners will be eligible to receive an upfront lump sum payment of up to $250 for a single and $380 for a couple. This payment will be provided to pensioners in May-June 2012 in order to meet additional costs expected as a result of the carbon tax.


Small businesses (with less than $2m turnover) will not have to monitor their carbon pollution. These small businesses will receive the following benefits:

  • An increase in the small business asset write off from 1 July 2012 to $6,500 (increase of $1,500)
  • Assistance in reducing energy costs
  • Clean technology advice
  • Support to assist in reducing the carbon footprint and help to develop new clean technologies

With the unpredictable rise in business costs on the horizon, the government has not pledged to provide these small businesses with any direct funding or compensation. It is likely that these businesses will have to pass on their additional costs to the end consumer


There will be a significant amount of assistance provided to the nation’s agricultural sector through the scheme, these include:

  • Rewarding farmers for capturing carbon on their land. They can do this through planting more trees, reducing methane from livestock or reducing fertiliser emissions
  • Providing assistance to primary producers in order for them to better adapt and respond to the changing environment
  • The agricultural industry will not be subject to the reduction in fuel tax credits


A carbon price will be added to fuels used in domestic aviation, marine and rail transport.

There will be no carbon price on private and light commercial use vehicles. Fuel tax credits will be reduced for businesses from 2012-2013, agriculture, forestry and fishing industries will be exempt. Initially there will be no carbon tax on heavy on road vehicles, but the Government intends to impose a tax from 1 July 2014.