The Carbon Tax Compensation Package has received a lot of media in recent weeks with the government’s announcement of lump-sum payments to be delivered to low and middle income earning Australians in the next 2-3 months.These payments are an attempt by the government to assist Australians with the additional costs of living that will go hand-in-pocket with the introduction of the Carbon Tax Scheme from 1 July 2012. According to the government, the likely end-consumer impact of the carbon tax will be an ‘average’ increase in household spending of $9.90 a week. To offset this, the ‘average’ household will receive $10.10 a week in assistance as part of the government’s Carbon Tax Compensation Package. The government maintains this will see 2 out of 3 households receiving assistance to offset higher costs of living.Announced in July 2011, the Carbon Tax Scheme has been much debated in the community. But the reality is – its introduction is looming. So just how will you be supported by the Carbon Tax Compensation Package? This article examines the government’s range of tax cuts and assistance measures aimed at reducing the impact of the Carbon Tax.
Tax Cuts
The following table summarises the adjustments to the tax-free thresholds and marginal tax rates from our current financial year (2012) through to introduction of the Carbon Tax Scheme (2013) and beyond (2014, 2015 and 2016):
| Statutory rates & thresholds | 2011-12 | 2012-13 to 2014-15 | 2015-16 | |||
| Threshold ($) | Marginal Rate | Threshold ($) | Marginal Rate | Threshold ($) | Marginal Rate | |
| 1st rate | $6,001 | 15% | $18,201 | 19% | $19,401 | 19% |
| 2nd rate | $37,001 | 30% | $37,001 | 32.50% | $37,001 | 33% |
| 3rd rate | $80,001 | 37% | $80,001 | 37% | $80,001 | 37% |
| 4th rate | $180,001 | 45% | $180,001 | 45% | $180,001 | 45% |
| Effective tax free threshold | $16,000 | $20,542 | $20,979 | |||
| LITO | $1,500 | 4% withdrawal rate from $30,000 | $445 | 1.5% withdrawal rate from $37,000 | $300 | 1% withdrawal rate from $37,000 |
Effectively, what this means for Australian taxpayers is:
- 1 million workers will no longer have to pay tax or lodge a tax return with the tripling of the tax-free threshold (Tax Free Threshold of $6,000 becomes $18,200 from 1 July);
- The Low Income Tax Offset (LITO) will be reduced from $1,500 to $445 which will mean that individuals can effectively earn up to $20,542 without paying any income tax; and
- 6 million workers (especially part-time workers, students, mothers in casual work and retirees) earning $80,000 or less per year will receive up to a $300 p.a. tax cut.
To demonstrate the range of tax cuts delivered from 1 July 2012 the following table looks at Tax Cuts by Income:
| Income | Tax cuts* | ||
| From 1 July 2012 | From 1 July 2015 | Total | |
| $20,000 | $600 | - | $600 |
| $25,000 | $503 | $83 | $586 |
| $30,000 | $303 | $83 | $386 |
| $35,000 | $303 | $83 | $386 |
| $40,000 | $303 | $83 | $386 |
| $45,000 | $303 | $83 | $386 |
| $55,000 | $303 | $83 | $386 |
| $55,000 | $303 | $83 | $386 |
| $60,000 | $303 | $83 | $386 |
| $65,000 | $303 | $83 | $386 |
| $70,000 | $253 | $63 | $316 |
| $75,000 | $128 | $38 | $166 |
| $80,000 | $3 | $13 | $16 |
* Personal Income tax cuts compared to 2011-12. Does not include the Medicare Levy or the impact of the temporary flood and cyclone reconstruction levy ending in 2011-12. Source: Clean Energy Future (www.cleanenergyfuture.gov.au)
Government Assistance: Clean Energy Advance (lump sum) & ongoing Supplements:
FAMILIES. From 16 May through to 29 May, families already receiving Family Tax Benefit (FTB) Part A will receive a lump- sum payment. From July 2013, eligible families will receive a new fortnightly Clean Energy Supplement equivalent to a 1.7% increase in the relevant maximum annual rate of FTB (worth up to $110 per child per year). Single Income Families already receiving Family Tax Benefit (FTB) Part B will receive up a lump-sum payment. In addition, from 1 July 2012, a new Single Income Family Supplement will be introduced to provide up to $300 for eligible single income earning families. From July 2013, eligible families will receive a new fortnightly Clean Energy Supplement equivalent to a 1.7% increase in the relevant maximum annual rate of FTB (worth up to $69 per family per year).
PENSIONERS. From 28 May through to 8 June, pensioners will receive a one-off upfront payment of $250 for a single pensioner and $190 for each eligible member of a couple. According to the government, this payment is designed to help pensioners meet additional costs from the 9 months starting 1 July until the first instalment payment of the Clean Energy Supplement due March 2013. This Clean Energy Supplement will then be received fortnightly and be calculated on a 1.7% increase in the maximum rate of their pension and indexed to CPI.
SELF-FUNDED RETIREES. Self-funded retirees who hold a Commonwealth Seniors Health Card will receive the same amount of assistance as age pensioners. They too will receive a Clean Energy Advance as a one-off payment of $250 for a single pensioner and $190 for each eligible member of a couple. From March 2013, Commonwealth Seniors Health Cardholders will receive assistance via a quarterly Clean Energy Supplement equivalent to a 1.7% increase in the maximum rate of the pension and indexed to CPI.
STUDENTS. From 11 June through to 22 June, students will receive a lump-sum payment. From 1 July 2013, students eligible for Youth Allowance, Austudy and Abstudy will receive an increased amount equivalent to 1.7% of the maximum rate indexed to CPI. This is an increase of up to $190 for singles and, if they have dependent children, this amount will be more.
More Information:
For more information on the topic of the Carbon Tax refer to our previous Articles (Carbon Tax Scheme: Individual Tax Measures and Carbon Tax Scheme: key details and what does the government plan to do for small business? ) along with the following links:
- Clean Energy Future:http://www.cleanenergyfuture.gov.au
