What the carbon tax means for you

With the repeal of carbon tax legislation, the content on this page no longer applies.

As the carbon pricing mechanism comes into effect on 1st July 2012 we take a look at the implications for businesses and households.

Officially there is no Carbon Tax; rather the government will levy major polluters at the rate of $23 per tonne of actual carbon emissions until 1st July 2015 when the price will change and become flexible. It's hard to say how this will affect consumers and business over the long term, but:

Here's what we know today

There are 18 pieces of legislation that cover implementation of the new regime. The pricing mechanism, (in our view a tax), will be levied on approximately 330 of the country's major polluters. The first 248 companies have now been confirmed and published on the Clean Energy website. 

There is no direct cost to SMEs or individuals. They will not have to report or monitor emissions and road transport fuels are not affected by the Carbon Tax. Rather, the cost to SMEs and individuals will be seen in higher prices for utilities and everyday goods as these companies pass the extra costs down through the supply chain.

Some sources indicate the following price rises are possible:

Electricity - increase 10%

In addition electricity is expected to increase by 20% due to other factors, providing a total increase of up to 30% over the next 3-4 years

Gas - increase 15%

Waste - increase unknown due to potential levy on rubbish tips that emit methane

Water - increase 0.5-1.5%

Fuel - there is an equivalent carbon tax on aviation, off road and rail transport fuel by reducing the current diesel fuel rebate

Steel - increase 0.5-2%

Concrete - increase 0.5-2%

Aluminium - increase 0.5-2%

Chemicals - increase unknown

Paper - increase unknown

What do businesses need to know?

There are a number of assistance programs for business including incentives for land based industry i.e. primary producers. (As a point of interest - carbon dioxide is rated 1 per unit of emission and methane is rated 21 per unit of emission, so livestock contribute significantly to carbon emissions.) There are also incentives for emission intensive trade industries e.g. steel and concrete as well as clean technology programs for manufacturers. Details of business assistance can be found here.

It is important to check the costs from your suppliers to ensure only those costs associated with the carbon tax are being passed on. Some organisations - such as airlines - are already advising they will include a carbon tax surcharge in the price of their products and services.

When it comes to pricing your own products and services, it is important to review customer contracts and check the ACCC website for guidelines as to what can be done. You can download 'Carbon price claims – Guide for business' here.

What do households need to know?

There will be some compensation for households, including tax cuts and government payments under the household assistance package. A household assistance calculator can be found here.

For more information about the introduction of the carbon pricing mechanism, visit the Clean Energy Regulator.

Posted by Doug Mitchell
<p>Doug has overseen the growth of Mitchell Wilson for two decades, where his knowledge and integrity have made him a trusted partner to business owners and entrepreneurs in industries as diverse as financial services, travel, media and transport.</p>