10 Jun 11 Preamble - Friday 10 June 2011
Last week Professor Ross Garnaut delivered his final commissioned climate change report to the Government. It hinges on a carbon price of $26 per tonne which will raise $11.5 billion in the first year of operation. He says that more than half of this revenue should go to households as compensation, more than a third to businesses and the remainder towards innovation and new technologies. Low and middle income families will be fully compensated for the increase in prices brought about by a carbon tax, by increasing the tax-free threshold to $25,000 and removing the low-income tax offset and senior's tax offset. This would be accompanied by an increase in the tax rates/or a lowering of the tax brackets for higher income earners to mitigate the full compensation contained within the threshold increase. Those that can afford to pay the carbon tax - and Garnaut says a higher income equates to $80,000 per annum - should do so without Government offsets in the form of tax cuts or pension increases.
Of course this is not yet Government policy, but it is another rich resource from which the Government and the Multi-Party Climate Change Committee will draw to finalise further details of the carbon tax policy.
We await further details with great interest. As we saw with the previous Prime Minister's emissions trading scheme, many tax considerations can readily come into play, resulting in increased complexity. Policies must not be developed in isolation and without the input of relevant professionals to advise and assist.
As always, I'm interested in your thoughts. Please feel free to email us at Tax Policy.
Please see below for other activities this week.
Robert Jeremenko FTIA