Q: Can you please explain the likely financial impact of the Carbon Tax. I earn $92,000 and my wife $50,000 working part time. We have 3 kids. Will we have more or less money in our pocket each week as a result?
A: On Tuesday 8 November, the Government’s Clean Energy Bill passed the Senate and will now become law. From 1 July 2012, Carbon emissions will be taxed at a rate of $23 per tonne. From 2015, the price of Carbon will be set by the market. Carbon tax will be paid by Australian businesses emitting more than 25,000 tons of Carbon each year (around 500 Companies).
According to the Government, 9 out of 10 households will be no worse off with the imposition of the tax as a result of tax cuts and increases to family benefits.
Treasury estimate that an average family is expected to see weekly Household bills increase by around $10 per week. Overall household expenditure has been forecast to increase by .7%. If you are a heavy consumer of gas or electricity, the impact will be greater with expected increases of 8% for power and fuel costs. Full details of the estimated impacts of the Carbon Tax on household expenditure items can be found at www.treasury.gov.au
To compensate for the Carbon Tax, the Government has introduced changes to Income Tax rates, Thresholds and also the Low income Tax Offsets (LITO).
Currently the Maximum LITO of $1,500 creates an effective tax-free threshold of $16,000. From 2012/13, the Maximum LITO of $445 creates an effective tax-free threshold of $20,542.
Assuming you have Private Health Insurance, this Financial Year you and you wife will pay Income Tax of $32,670 (excluding $210 in Flood Levy). Next Financial Year you will pay $31,914, a reduction of $756.
Your ability to reduce your families Carbon emissions will directly impact on your costs of living. Provided that your weekly living expenses do not increase by more than $14.50, you will not be worse off.
This article was published in The Australian on 19 November 2011. A direct link to the article can be found here.
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