Contents

Household Assistance Support for working Australians Household Assistance Self Funded Retirees Household Assistance Pensioners Household Assistance Supporting Low Income Households Household Assistance Essential Medical Equipment Household Assistance Students and Jobseekers Household Assistance Carers and People with a Disability Household Assistance Families Household Assistance Tax Reform Household Assistance Aged Care Residents Regional Australia Supporting Jobs and Industry Small Business Local Government Biodiversity Fund Transport Fuels Tax Treatment 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

1. Household Assistance Support for Working Australians

Around 60 per cent of all taxpayers will get a tax cut of at least $300 from 1 July 2012. Every taxpayer under $80,000 gets a tax cut, and no-one pays more tax. The tax cut will be permanent. From 2015-16, further permanent tax cuts will provide assistance for a floating carbon price to at least the end of the decade.

Tax cuts to reward hard working Australians

From 1 July 2012, new tax cuts will reward hard work and provide assistance through to the third year of the carbon price, from day one of the carbon price. People with annual income of $25,000 will receive a tax cut of $503. Those on middle incomes within the range of $30,000 and $65,000 will receive a tax cut of $303. The top 23 per cent of taxpayers with annual income of over $80,000 will also get a slight tax reduction. The tax cuts will be delivered through an increase in the tax free threshold from $6,000 to $18,200. This means workers earning less than $18,200 wont have any income tax withheld from their regular pay. When combined with the low income tax offset (LITO), workers wont pay any net tax until they earn $20,542. The tax cuts are permanent and will flow automatically into regular pay packets from 1 July 2012.

More tax cuts for the floating carbon price

The Government will provide more tax cuts in 2015-16, to every taxpayer up to $80,000. Most will get a further tax cut of at least $80. These cuts are expected to provide assistance for the projected carbon price out to at least the end of the decade, in 2019-20. These tax cuts will be delivered by a further increase in the tax free threshold to $19,400. These tax cuts are also permanent, and will flow automatically into regular pay packets from 1 July 2015. This is the minimum level of assistance that will be provided. Assistance will be reviewed closer to the start of the floating carbon price period to ensure that it is sufficient, and increased if necessary.

700 600 500 400 300 200 100 0

Tax Cut ($)

Tax Cut ($)

700 600 500 400 300 200 100 0

$20,000*

$30,000 Tax cut 2012-13

$40,000

$50,000

$60,000 Tax cut 2015-16

$70,000

Taxable Income

2. Household Assistance Self-funded Retirees

Senior Australians who are self-funded retirees and hold a Commonwealth Seniors Health Card will receive an additional payment with their Seniors Supplement. In addition, self-funded retirees may also be eligible for tax cuts.

Commonwealth Seniors Health Card holders

Commonwealth Seniors Health Card holders will receive assistance through the Seniors Supplement, of $338 for singles, and $255 for each eligible member of a couple. This is the same amount of assistance pensioners will receive through their pension payment. Assistance to Commonwealth Seniors Health Card holders will be delivered through a Clean Energy Advance, which will be paid as an up-front lump sum payment of $250 for a single and $190 for each eligible member of a couple. This payment will be provided to eligible seniors in May-June 2012 to help meet additional costs for the nine months from 1 July 2012. From March 2013 assistance will be delivered as a separate Clean Energy Supplement, and will be paid quarterly at the same time as the Seniors Supplement.

Assistance through the personal tax system

The Government will assist households through tax cuts from 1 July 2012. All taxpayers up to $80,000 will get a tax cut, with most getting a cut of at least $300. These tax cuts will be delivered by a more than threefold increase in the statutory tax free threshold from $6,000 to $18,200, and an associated reduction in the Low Income Tax Offset (LITO) to $445. The tax package will also increase the thresholds for the Senior Australians Tax Offset, providing additional tax cuts to self-funded retirees. For example, a self-funded retiree with taxable income of $40,000 will receive a tax cut of $199 from the changes to the Senior Australians Tax Offset, in addition to the $303 tax cut provided through the Governments other tax reforms. Further tax cuts will be provided when Australia moves to an emissions trading scheme in 2015-16. For more information, see the fact sheet on reforms to the personal tax system.

Other assistance
Self-funded retirees in low-income households who do not receive sufficient assistance through the tax or transfer system may be eligible for the annual Low Income Supplement of $300 from 1 July 2012.

3. Household Assistance Pensioners

More than 3 million Australian pensioners will receive household assistance to help them with increased living costs as a result of the introduction of a carbon price. Pensioners will receive assistance through a Clean Energy Advance and a Clean Energy Supplement connected to their pension. Part-rate pensioners who pay tax may also be eligible for tax assistance.

Pension increases
Pensioners will be eligible to receive household assistance that at least offsets all of their expected average price rises under a carbon price. Pensioners will receive an amount of assistance equivalent to a 1.7 per cent increase in the maximum rate of the pension. This is an increase of up to $338 for singles, and $255 for each eligible member of a couple a year. The increase will be delivered as a new, permanent and tax exempt Clean Energy Supplement, which will be paid in line with pensioners regular payment cycles from 20 March 2013. The Clean Energy Supplement will be indexed by the Consumer Price Index to ensure its value is maintained over time, and is in addition to the existing Pension Supplement. Pensioners will also receive a separate Clean Energy Advance, which will be paid as an up-front and tax exempt lump sum payment of up to $250 for a single and $190 for each eligible member of a couple. This payment will be provided to pensioners in May-June 2012 to help meet additional costs for the nine months from 1 July 2012 to when the first instalment of the new Clean Energy Supplement is paid from March 2013. Pensioners who will receive this increase under household assistance include recipients of the Age Pension, Disability Support Pension, Carer Payment, Service Pension and Wife Pension. The payments will be automatic and pensioners don't need to lodge a special application.

Assistance through the personal tax system

The Government will assist households through tax cuts from 1 July 2012. All taxpayers with income up to $80,000 will get a tax cut, with most getting a cut of at least $300. These tax cuts will be delivered by a more than threefold increase in the statutory tax free threshold from $6,000 to $18,200, and an associated reduction in the Low Income Tax Offset (LITO) to $445. Further tax cuts will be provided when Australia moves to an emissions trading scheme in 2015-16. The Pensioner Tax Offset will also be rolled in to the more generous Senior Australians Tax Offset, with the new offset called the Seniors and Pensioners Tax Offset. For a taxable part-rate pensioner under the age pension

age with taxable income of $40,000, this will provide an additional financial benefit of around $279 in 2012-13 compared to 2011-12, over and above the tax cuts provided through the Governments other tax reforms. For more information, see the fact sheet on reforms to the personal tax system.

4. Household Assistance Supporting Low Income Households

Through tax cuts and increases to Government payments, all low income households will be provided assistance that covers at least 100 per cent of their expected average impact of the introduction of the carbon price. Many will be better off.

Assistance through the personal tax system

The Government will assist households through an $8 billion tax reform package including $7 billion of tax cuts. In 2012, people will pay less tax because the Government will more than triple the tax free threshold from $6,000 to $18,200. As a result, from 1 July 2012, taxpayers with income below $80,000 will all get a tax cut, with most receiving at least $300 a year, and up to one million additional Australians will be freed from having to lodge a tax return. A higher tax free threshold and tax cuts mean more money in peoples pocket from week to week and better returns for work. The tax cuts will benefit low-income workers in particular, including part-time secondary earners and those returning to the workforce. For example, someone earning $20,000 will get $600. Someone earning $25,000 will get $500 and someone earning $30,000 will get $300 in tax cuts. Further tax cuts will be delivered in 2015 by increasing the tax free threshold to $19,400. This will mean people with incomes below $80,000 will get further tax cuts, with most receiving at least $385 per year from the two rounds of tax cuts combined, and a further 100,000 Australians will no longer have to lodge a tax return. For more information, see the fact sheet on reforms to the personal tax system.

Assistance through Pensions, Income Support and Family Payments

Assistance will be provided to people who receive payments such as the Age Pension, Disability Support Pension, Carer Payment, Newstart Allowance and Family Tax Benefit, through increases in these payments. The introduction of the carbon price is expected to result in a once off increase in prices of 0.7 per cent in 2012-13. In order to ensure low-income households are able to cover their average expected price impact, most government payments will be increased by an amount equivalent to 1.7 per cent of the maximum rate. The base rate of Family Tax Benefit Part A will also be increased by 1.7 per cent. This assistance will first be delivered to pensioners, allowees, Family Tax Benefit and other eligible recipients through a one-off, tax-exempt, lump sum Clean Energy Advance in May or June 2012. After that, assistance will be paid through a new Clean Energy Supplement at the same time as payments.

Low Income Supplement

Some low-income households might not receive enough assistance through tax cuts or Government payments to offset their average expected cost impact under a carbon price. These households will be able to apply for an annual, tax-exempt Low Income Supplement of $300, which will ensure they receive sufficient assistance as they adjust to changes in their costs of living after the carbon price is introduced. People in low income households can apply for the Low Income Supplement through Centrelink. The supplement will be paid by Centrelink on an annual basis as a lump sum of $300 from 1 July 2012. A person can only receive one payment in an income year.

Who is eligible?
Eligibility for the Low Income Supplement is based on an individuals income and whether they have received other assistance through tax cuts or benefits. The following income limits apply to eligibility: $30,000 for singles without a dependent child; $45,000 for couples without a dependent child; $60,000 for singles with a dependent child; $60,000 for couples with a dependent child.

When and how can I claim?

Applications can be made closer to 1 July 2012 when the carbon price is introduced.

5. Household Assistance Essential Medical Equipment

People holding a Commonwealth concession card who have home energy costs because they rely on essential medical equipment may be eligible to receive extra assistance.

Supporting those who use essential medical equipment

The Government understands that some people have higher than average electricity use in their home because they use medical equipment that is needed to maintain their health. Examples include people using home dialysis machines for kidney disease, people running ventilators for conditions such as motor neurone disease and those who cannot regulate their body temperature and need to use continuous home heating and cooling. Carbon pricing is expected to impact on the price of electricity. To offset the electricity price impacts on people with these medical needs, the Government will provide an Essential Medical Equipment Payment. The Essential Medical Equipment Payment will provide assistance of $140 annually from 1 July 2012. It will be available to eligible Australians who experience additional increases in home energy costs under a carbon price as a result of the medical equipment use in their home to manage their disability or medical condition. The $140 is sufficient to cover the expected change in running costs for a kidney dialysis machine, which is the highest energy use machine covered by this payment. To be eligible for the Essential Medical Equipment Payment, a person must hold, or be caring for someone in their household who holds, one of the following concession cards: Health Care Card; Pensioner Concession Card; Commonwealth Seniors Health Card; or DVA Gold Card or White Card. The concession card holder must be using one of the specified medical appliances to manage their medical condition. The appliances covered include equipment currently covered by any of the state or territory government rebate schemes for life support equipment or medical cooling. Equipment that is covered includes (but is not limited to): Oxygen concentrators Phototherapy equipment Ventilators Suction pumps Dialysis machines Feeding pumps External heart pumps Insulin pumps

Concession cardholders who are certified by their doctor as having an inability to regulate their body temperature and needing additional heating/cooling may also be eligible for the Essential Medical Equipment Payment. The claimant (concession cardholder or carer) must be the holder of the electricity account for which assistance is claimed.

Getting assistance
People will be able to claim the Essential Medical Equipment Payment through Centrelink, with DVA concession cardholders claiming through DVA. Once claimed, the Essential Medical Equipment Payment will be paid annually until the persons circumstances change.

6. Household Assistance Students and Job seekers

Students and jobseekers will receive assistance though tax cuts and increases to Government payments such as Youth Allowance and Newstart Allowance.

Supporting students and job seekers

The Australian Government is committed to providing assistance to low-income students and job seekers to help them to meet the average expected impact of carbon pricing on their cost of living.

Assistance for students

The introduction of the carbon price is expected to increase the cost of living by 0.7 per cent in 2012-13. To assist students with this expected impact, student allowances such as Youth Allowance, Austudy and Abstudy will be increased by an amount equivalent to 1.7 per cent of the maximum rate. This is an increase of up to $177 for singles and more if they have dependent children. This assistance will first be through a one-off, tax-exempt, lump sum Clean Energy Advance in May or June 2012. After that, assistance will be paid through a new Clean Energy Supplement at the same time as payments. The payments will be automatic and students don't need to lodge a special application.

Assistance for job seekers

Jobseekers will also be assisted with an increase in payments equivalent to a 1.7 per cent increase in the maximum rate of Newstart Allowance, worth up to $218 for singles and $195 for each member of a couple. This assistance will first be through a one-off, tax-exempt, lump sum Clean Energy Advance in May or June 2012. After that, assistance will be paid through a new Clean Energy Supplement at the same time as payments. The payments will be automatic and job seekers don't need to lodge a special application.

Students and jobseekers with some earned income are also likely to benefit from tax cuts
Students and job seekers who are in paid employment are also likely to benefit from tax cuts, which will allow them to keep more of their private income, including employment income. The Government will assist households through an $8 billion tax reform package including $7 billion of tax cuts. In 2012, people will pay less tax because the Government will more than triple the tax free threshold from $6,000 to $18,200. As a result, from 1 July 2012, taxpayers with income below $80,000 will all get a tax cut, with most receiving at least $300 a year, and up to one million Australians will be freed from having to lodge a tax return.

Further tax cuts will be delivered in 2015 by increasing the tax free threshold to $19,400. This will mean people with incomes below $80,000 will get further tax cuts, with most receiving at least $385 per year from the two rounds of tax cuts combined, and a further 100,000 Australians will be freed from having to lodge a tax return.

Other assistance for students and job seekers

Students and job seekers who might not receive enough assistance through tax cuts or Government payments to offset their average expected cost impact will be able to claim the new $300 annual Low Income Supplement separately through Centrelink.

7. Household Assistance Carers and People with Disability

More than one million Australians with disability and carers will receive household assistance through their Disability Support Pension or Carer Payment. This will cover at least the expected average increase in living costs that results from the introduction of a carbon price. Other people with disability and carers who do not receive income support may receive household assistance by paying less tax on their private income. In addition, concession card holders (or their carer) with high electricity use due to a medical condition may be eligible for additional assistance.

Pension increases
Recipients of the Disability Support Pension and Carer Payment will be eligible to receive household assistance that at least offsets the expected average cost of living impact under a carbon price. All pensioners will receive assistance equivalent to a 1.7 per cent increase in the maximum rate of the pension. This is an increase of up to $338 for singles, and $255 for each member of a couple per year. The increase will be delivered as a new, permanent Clean Energy Supplement, which will be paid in line with regular payment cycles from 20 March 2013. The Clean Energy Supplement will be indexed by the Consumer Price Index to ensure its value is maintained over time, and is in addition to the existing Pension Supplement. Pensioners will also receive a separate Clean Energy Advance, which will be paid to pensioners as an up-front lump sum payment of $250 for a single and $190 for each eligible member of a couple. This payment will be provided to pensioners in May-June 2012 to help meet additional costs for the nine months from 1 July 2012 to when the first instalment of the new Clean Energy Supplement is paid from March 2013. The payments will be automatic and pensioners don't need to lodge a special application.

Other payments
From 1 July 2012, people with high home energy costs due to their reliance on essential medical equipment will also be able to claim an annual Essential Medical Equipment Payment of $140 through Centrelink or the Department of Veterans Affairs. This extra assistance is designed to ensure they do not incur extra costs for using their medical equipment after the introduction of a carbon price. To be eligible, a person must meet particular medical criteria and hold a relevant concession card, for example, a Health Care Card, a Pensioner Concession Card, a Commonwealth Seniors Health Card or a DVA Gold Card. The person claiming the payment must either be using the medical equipment or be the carer of the person using the equipment.

Assistance through the personal tax system

The Government will assist households through tax cuts from 1 July 2012. All taxpayers earning up to $80,000 will get a tax cut, with most getting a cut of at least $300. These tax cuts will be delivered by a more than threefold increase in the statutory tax free threshold from $6,000 to $18,200, and an associated reduction in the low income tax offset (LITO) to $445. Further tax cuts will be provided when Australia moves to an emissions trading scheme in 2015-16. For more information, see the fact sheet on reforms to the personal tax system.

8. Household Assistance Families

9 out of 10 families with children will be provided with assistance to help meet the expected average impact of a carbon price on their cost of living.

Assistance for families

All low-income families are eligible for assistance that covers the expected average impact of carbon pricing on their cost of living. Many will be better off, receiving a buffer of assistance to ensure they can meet their costs. All middle-income families are also eligible for assistance that will help them to meet the expected impacts of carbon pricing on their living expenses. Depending on the familys income, the package of assistance will be a combination of reductions in their income tax and/or increases in any benefits they may receive, such as Family Tax Benefit (FTB), pensions or allowances. This package of assistance will appropriately account for different household types and sizes.

Assistance through Family Tax Benefit

Families receiving Family Tax Benefit Part A will receive an increase in their payment equivalent to 1.7 per cent of the annual rate of payment. Both the maximum rate and the base rate of Family Tax Benefit Part A will be increased by 1.7 per cent. This is worth up to $110 per child per year. All families receiving Family Tax Benefit Part B will get an increase to their payment equivalent to 1.7 per cent of the maximum rate. This is worth up to $69 per family per year. This assistance will first be delivered to pensioners, allowees, Family Tax Benefit and other eligible payment recipients through a one-off, tax-exempt, lump sum Clean Energy Advance from May-June 2012. After this the increases will be delivered as a separate Clean Energy Supplement, which will be paid as part of families regular payment cycles.

Assistance through income support

Other income support payments that parents may receive such as Parenting Payment or Newstart Allowance will also be increased by an amount equivalent to 1.7 per cent of the maximum rate. For Parenting Payment Single this amounts to an increase of up to $289. This assistance will first be delivered to pensioners, allowees, Family Tax Benefit and other eligible recipients through a one-off, tax-exempt, lump sum Clean Energy Advance in May or June 2012. After that, assistance will be paid through a new Clean Energy Supplement at the same time as payments.

People in low-income family households who do not receive sufficient assistance as an increase to their payment or through the tax system will also be able to claim a new Low Income Supplement of $300. The supplement will be claimed through Centrelink. Further assistance will be made available to middle-income family households with one primary earner to account for the fact they will only benefit from one earners tax cuts. These families will receive assistance as an increase to their payment through the Single Income Family Supplement of $300. Families not receiving FTB will be able to claim the supplement through Centrelink. Assistance will also be available for pensioners, self-funded retirees, students, jobseekers, and carers. Further information about assistance to these families is detailed in the relevant fact sheet.

Assistance through the personal tax system

The Government will assist households through tax cuts from 1 July 2012. All taxpayers with incomes up to $80,000 will get a tax cut, with most getting a cut of at least $300. These tax cuts will be delivered by a more than threefold increase in the statutory tax free threshold from $6,000 to $18,200, and an associated reduction in the Low Income Tax Offset (LITO) to $445. This increase in the tax free threshold will mean up to one million Australians will be freed from having to lodge a tax return. Regular wage earners with incomes below the new tax free threshold will not have any tax withheld from their wages by employers, which will increase the incentives to work. This will particularly benefit part-time workers. Further tax cuts will be delivered in 2015 by increasing the tax free threshold to $19,400. This will mean people with incomes below $80,000 will get further tax cuts, with most receiving at least $385 per year from the two tax cuts combined, and a further 100,000 Australians will be freed from having to lodge a tax return. For more information, see the fact sheet on reforms to the personal tax system.

9. Household Assistance Tax Reform

The Government will provide an $8 billion tax reform package, including $7 billion of tax cuts, from 1 July 2012 targeted at low and middle-income earners. Around 60 per cent of all taxpayers will get a tax cut of at least $300 from 1 July 2012. Every taxpayer up to $80,000 will get a tax cut, and no one will pay more tax. The tax cuts will be delivered through major structural reform that increases the tax free threshold from $6,000 to $18,200. This means up to one million people will no longer need to fill in a tax return. When combined with the low income tax offset (LITO), people will not pay net tax until their income exceeds $20,542. In 2015-16, further tax cuts will be provided to every taxpayer up to $80,000, worth at least $80 per year for most. This will provide assistance for the flexible price period to cover the carbon price to at least 2019-20.

Cutting income tax and freeing more than a million people from filing a tax return
The Government will make structural improvements to the tax system as well as assisting households by introducing a higher tax-free threshold. The changes the Government is proposing will modernise and improve the personal tax system, making it more transparent and simpler for users to understand, consistent with the recommendations of the Australias Future Tax System Review (AFTS). Raising the tax free threshold to $18,200 will free up to a million people from having to lodge a tax return from 2012-13. This will make life easier for many low-income earners who currently have to interact with both the tax system through the Australian Taxation Office and the transfer system through Centrelink. In future, many of these people will only have to interact with the transfer system. In 2015-16, the Government will increase the tax free threshold again to $19,400, to provide assistance for the projected carbon price out to 2019-20 and will free a further 100,000 people from having to file a tax return. This extra assistance will be reviewed closer to when Australia moves from a fixed carbon price to an emissions trading scheme, and may be increased if required, but it will not be reduced. In addition to assisting households for a carbon price, this tax reform will contribute substantially to the Governments wider economic reform agenda aimed at strengthening the Australian economy for future generations.

Complexity and lack of transparency in the current tax system

Currently the LITO is used to deliver tax relief to low- and middle-income earners. While the LITO has been effective in delivering targeted relief to these groups, it has also created a gap between the published tax rates and thresholds that people see, and the effective tax rates and thresholds that people ultimately face. It is a little known fact that most people who are nominally within the 30 per cent marginal tax rate bracket actually face an effective marginal tax rate of 34 per cent. Taxpayers between $30,000 and $67,500 currently pay their statutory marginal tax rate of 15 or 30 per cent, plus the 4 per cent tax rate created by the reduction of the LITO at four cents per dollar. The Government will cut this from 4 per cent to 1.5 per cent on 1 July 2012, and increase the threshold so that it only applies to income over $37,000. From 1 July 2015, the Government will cut it further, to 1 per cent. Although there are higher headline statutory tax rates, the combination of a higher tax free threshold and lower rate of reduction for the LITO, mean tax cuts for all taxpayers up to $80,000; and no-one pays more tax. For example, currently, a person earning $60,000 faces a headline statutory tax rate of 30 per cent, but also loses 4 cents of LITO for every dollar they earn. This means their combined marginal tax rate is actually 34 per cent (excluding the Medicare levy). Under the new scales from 1 July 2012, they will face a statutory tax rate of 32.5 per cent, but only lose 1.5 cents of LITO for every dollar they earn. So their combined marginal tax rate is still 34 per cent, but it is now more transparent. The tax reforms the Government is introducing will more closely align published marginal tax rates with effective marginal tax rates, which is more transparent and fairer for everybody. In addition, the fact that the LITO is not explicitly reflected in the published tax schedule means that many low-income earners need to lodge an income tax return, even when their tax liability after the LITO is accounted for is nil. By incorporating more of the LITO into the tax free threshold and increasing transparency, it is easier for people to judge whether or not they need to lodge a tax return.

Key facts
The tax free threshold will be increased more than threefold, from $6,000 to $18,200, freeing up to one million low-income earners from needing to lodge a tax return from 2012-13. A higher statutory tax free threshold means better interactions with the transfer system and builds on the reforms the Government introduced in the Budget, which mean more cash in peoples take home pay from week to week and more immediate and direct returns to work. The LITO will be reduced from $1,500 to $445, with the benefit being reflected in the new tax free threshold. The combined effect of the higher statutory tax free threshold and the LITO is that the effective tax free threshold will rise to $20,542. This means that individuals can earn up to $20,542 from 2012-13 without paying any net income tax. All taxpayers below $80,000 receive a tax cut from 1 July 2012, with most getting a cut of at least $300. This means around 60 per cent of all taxpayers will receive a tax cut of at least $300 and no one will be required to pay more income tax. These changes are a major step towards the vision for a simpler, more transparent tax system, as identified by AFTS but without the tax increases through the middle income range that the AFTS personal tax scales would have resulted in.

 In 2015-16, the tax free threshold will increase by a further $1,200 to $19,400 so that those earning up to $68,000 will receive a tax cut of around $385 per year from 2015-16 compared to 2011-12. The effective tax free threshold applying to individuals will rise to $20,979 and an additional 100,000 people will be freed from having to lodge a tax return. These tax cuts will provide assistance to cover the projected price impact of the carbon price out to 2020. The tax cuts build on the three rounds of substantial tax cuts provided by the Government since 2007. By 2015-16, the total tax cuts provided to a person on an income of $30,000 will be $1,136 per year compared to 2011-12. For a person earning $80,000, their total tax cut will be $1,566, while a high-income earner on $180,000 will have received a tax cut worth $6,066 each year compared to 2011-12 (see the table on page 4 for more detail on tax cuts by income level). The pensioner tax offset will be rolled into the more generous senior Australians tax offset to create a single seniors and pensioners tax offset, further reducing complexity in the tax system.

The new tax scales

Current 2012-13 2015-16

Threshold Marginal Rate Threshold Marginal Rate Threshold Marginal Rate ($) ($) ($) 1st Rate 2nd Rate 3rd Rate 4th Rate LITO 6,001 37,001 80,001 180,001 Up to $1,500 15% 30% 37% 45% 4% withdrawal rate on income over $30,000 18,201 37,001 80,001 180,001 Up to $445 19% 32.5% 37% 45% 1.5% withdrawal rate on income over $37,000 19,401 37,001 80,001 180,001 Up to $300 19% 33% 37% 45% 1% withdrawal rate on income over $37,000

Effective tax free threshold*

16,000

20,542

20,979

* Includes the effect of the tax free threshold and the low income tax offset (LITO).

Tax cuts by income

Total tax cut in 2015 compared to 2007 $1,350 $1,336 $1,136 $1,886 $2,186 $2,186 $2,136 $1,936 $1,736 $1,536 $1,366 $1,216 $1,566+
**

Tax Income From 1 July 2012 $20,000 $25,000 $30,000 $35,000 $40,000 $45,000 $50,000 $55,000 $60,000 $65,000 $70,000 $75,000 $80,000+ $600 $503 $303 $303 $303 $303 $303 $303 $303 $303 $253 $128 $3

C u t s* From 1 July 2015 -$83 $83 $83 $83 $83 $83 $83 $83 $83 $63 $38 $13 Total $600 $586 $386 $386 $386 $386 $386 $386 $386 $386 $316 $166 $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. ** Tax cuts since 2007 are larger for people on incomes over $80,000

10. Household Assistance Aged Care Residents

Most aged care residents will receive assistance with costs resulting from the introduction of a carbon price. Arrangements will be introduced to ensure that assistance will be shared fairly between aged care residents and the aged care home.

Supporting aged care residents

The Governments household assistance package includes measures to ensure that the assistance available to pensioners is shared fairly between aged care residents and aged care providers. This recognises that aged care providers bear many costs for their residents, including electricity and food. Residents of aged care homes do incur incidental expenses and so will receive a fair portion of their assistance payments. About 50 per cent of assistance will flow to aged care providers while residents will get the remainder to assist with their day to day expenses. This is similar to how the 2009 increase in the age pension was shared with aged care providers. Residents of aged care homes may also be eligible for tax cuts if they have private income. Assistance to pensioners and Commonwealth Seniors Health Card holders will be delivered through a new Clean Energy Supplement. The assistance will be shared with aged care providers through an increase in the basic daily fee payable by a resident of an aged care facility from 84 per cent to 85 per cent of the total basic pension amount, from 1 July 2012. These arrangements mean that pensioners and Commonwealth Seniors Health Card holders living in aged care homes will get to keep any tax cuts they receive in addition to keeping around 50 per cent of the assistance paid through their pension or Seniors Supplement. Aged care residents who are not eligible for the age pension, service pension or the Commonwealth Seniors Health Card and who are living in an aged care home on 30 June 2012 will not see their fees increased due to the carbon price. A new Australian Government aged care subsidy will be paid to aged care homes for these residents so that these residents will not pay the increased daily fee. These new arrangements will start from 1 July 2012. Specific detail of assistance for aged pensioners and self-funded retirees can be found in the relevant Fact Sheet. .

11. Regional Australia

The carbon pricing mechanism will unlock opportunities for regional Australia to capitalise on the development of Australias world-class energy reserves and share in $10 billion of new investment through the Governments new Clean Energy Finance Corporation. A carbon price will not apply to agricultural emissions. This means there will be no requirement for farmers to pay for emissions from livestock or fertiliser use. Farmers and land managers will have the opportunity to gain rewards through the Carbon Farming Initiative. Over the period to 2014-15, $1 billion will be provided to landholders through the Biodiversity Fund and other land-based measures to establish new native vegetation and habitats in targeted areas of high conservation value. Funding will go towards projects which maintain or enhance existing native vegetation for its carbon and biodiversity benefits. Jobs in industries which have a strong presence in regional Australia will be supported by a Jobs and Competitiveness Package worth $9.2 billion over the first three years of the carbon pricing mechanism. An additional $500 million in assistance will be provided to steel manufacturers, food processors and metal foundries, and the $1.3 billion Coal Sector Jobs Package will provide transitional assistance to the coal industry over six years. Regions strongly affected by the introduction of a carbon price will be supported through the $200 million Regional Structural Adjustment Assistance package.

A clean energy future for regional Australia

Regional Australia will play a vital role in Australias clean energy future. Over eight million Australians live outside our major capital cities and two-thirds of the nations export earnings are generated in our regions. Regional Australia has some of Australias best renewable energy reserves including wind, solar and geothermal. Clean and renewable energy will receive a major boost through the Governments new $10 billion Clean Energy Finance Corporation. The Clean Energy Finance Corporation will help businesses seeking funds to get innovative clean energy proposals and technologies off the ground. A great deal of this investment will flow to regional and rural Australia.

Supporting jobs in industries with a strong regional presence

Treasury modelling demonstrates that state and regional impacts will vary depending on their emission intensity and opportunities to diversity into low-emission activities. Some regional communities which have industries that produce considerable carbon pollution may need assistance as Australia transitions to a clean energy economy. These areas will benefit from the Governments Jobs and Competitiveness Package an ongoing program worth $9.2 billion over the first three years of the carbon pricing mechanism. This package will safeguard jobs in industries which face international competition and produce a lot of pollution. Regional communities will also be supported through tailored programs worth $500 million for the steel industry, food processors and metal foundries and forgers. Treasury modelling shows that with a carbon price the mining sector will still experience strong growth and that it will increase as a proportion of the economy over the decade to 2020. Some individual coal mines, including mines in regional New South Wales and Queensland, have high levels of fugitive emissions and may face larger impacts. Workers and local communities relying on these mines will be supported through a $1.3 billion Coal Sector Jobs Package.

Benefits from increased investment in clean energy

Regional Australia will benefit from growth in the clean energy sector through increased employment and investment. The development of clean energy projects will engage the unique attributes of regions, including those with a strong industrial and skills base, existing infrastructure and alternative industries. For example, Chinchilla in Queensland and Moree in New South Wales have been announced as sites for new large solar power stations through the Solar Flagships program. A new, independent statutory body, the Australian Renewable Energy Agency, will be created to coordinate around $3.2 billion in existing grant funding programs supporting research, development and demonstration of new renewable energy technologies.

Remote Indigenous Energy Program

The Remote Indigenous Energy Program will help Indigenous communities access clean, affordable and reliable 24-hour power supplies. It will help communities to manage their energy efficiently and use it to contribute to improvements in health, education and long-term economic viability. Over four years, the $40 million program will build on the success of the former Renewable Remote Power Generation Program. It will provide additional financial support to install renewable energy generation systems like solar panels and wind turbines in around 55 remote Indigenous communities. This new program will also include training in power system maintenance and information to support households and communities manage their energy. This program ensures remote communities will also be part of the transformation to a clean energy future.

Creating opportunities on the land through the Carbon Farming Initiative

A carbon price will not apply to agricultural emissions, but farmers and land managers will have access to new economic opportunities through the Carbon Farming Initiative. The Carbon Farming Initiative will provide new economic rewards for farmers and landholders that take steps to reduce carbon pollution. It will do this by creating credits for each tonne of carbon pollution which can be stored or reduced on the land. Farmers and land managers will be able to generate income from credits for actions

including reforestation and revegetation, reduced methane emissions from livestock digestion, reduced fertiliser emissions and native forest protection. Through the Indigenous Carbon Farming Fund, Aboriginal and Torres Strait Islanders will receive assistance to participate in the Carbon Farming Initiative. Indigenous Australians manage around 20 per cent of Australias land mass, drawing on traditional knowledge of the landscape and its responses to fire, flooding and drought. Funding will also be provided for specialists to work with Indigenous communities on carbon farming projects.

Enhancing biodiversity through the Biodiversity Fund and Regional Natural Resource Management Planning
A new, ongoing Biodiversity Fund has been allocated $946 million over the first six years to support projects that establish, restore, protect or manage biodiverse carbon stores. The Biodiversity Fund will improve the resilience of Australias unique species to the impacts of climate change, enhance the environmental outcomes of carbon farming projects, and help landholders protect biodiversity and carbon values on their land. More details of the Biodiversity Fund can be found in a separate fact sheet. The $44 million Regional Natural Resource Management Planning for Climate Change Fund will build on the expertise and network of regional natural resource management organisations to help plan for climate change and to maximise the social, economic and environmental benefits of carbon farming projects. Natural resource management organisations will develop plans in each region to guide where carbon farming projects should be located in the landscape. These measures will ensure the protection of Australias ecosystems and increase the land sectors resilience to the impacts of climate change.

Other investments in the land

These new investments complement the Australian Governments existing $2 billion investment in the environmental management of our natural resources under Caring for our Country. Caring for our Country helps regional natural resource management groups, Indigenous groups, Landcare groups, industry bodies, land managers, farmers, local, state and territory governments, and communities protect Australias natural environment and sustainably produce food and fibre. Its goal is to achieve an environment that is healthier, better protected, well managed, resilient, and provides essential ecosystem services in a changing climate. Landcare groups will receive $188 million from the Caring for our Country program for conservation activities on private land on farms, in water catchments and at the regional level. Australias Farming Future is the Australian Governments climate change initiative for primary industries. It provides approximately $130 million over four years to help primary producers adapt and respond to climate change. The Australias Farming Future Climate Change Research Program funds research on reducing carbon pollution, better soil management and climate change adaptation. The FarmReady program boosts training opportunities for primary producers and Indigenous land managers to enable industry, farming groups and natural resource management groups develop strategies to adapt and respond to the impacts of climate change.

Regional Structural Adjustment Assistance package

In the short term, the Government understands that some regions and communities will face more significant impacts than others from reforms like the carbon price. A central element in the Australian approach to economic reform over the past three decades has been structural adjustment assistance. The Government will maintain this approach under the clean energy plan to help to ease the transition for strongly affected regions and communities.

The $200 million Regional Structural Assistance Package will be set aside for structural adjustment assistance for regions and communities, and if required there will be other initiatives which assist strongly affected areas and sectors. The Department of Regional Australia, Regional Development and Local Government will monitor the impacts of the carbon price on regions to determine areas where structural adjustment assistance may be required. For identified regions, structural adjustment assistance will be delivered through arrangements that engage state, territory and local governments, community groups and unions, including through place-based investment and service delivery approaches. Funding will support regional communities on a case-by-case basis. Examples of programs that may be supported include support for displaced workers and their families, support for affected small businesses, community development programs and economic diversification programs.

Strong investment in our regions

The Government recognises that strong, prosperous regions are essential for a strong, prosperous Australia. The 2011-12 Budget will deliver over $4.3 billion of initiatives from 1 July 2011 to ensure households and communities in regional Australia share in the nations success. This investment will drive improvements in regional hospitals and health, educational facilities and community and transport infrastructure.

Strengthening regional communities through Regional Development Australia

Regional development is best advanced by empowering local communities to derive local solutions. The national Regional Development Australia (RDA) network consists of 55 committees of local leaders who volunteer their time to work with government, business and community groups to deliver better services to their regions. The RDA committees across the country are assisting their regions to adapt to climate change and to transition to a clean energy future by engaging communities and businesses about the likely social and economic impacts of climate change and developing local ideas and solutions. In the high growth area of Queenslands Sunshine Coast, the RDA committee is working with its community to identify opportunities to bring together the regions emerging green technology sector, educational sector and expertise in environmental sustainability. The priority for RDA Sunshine Coast is to build the regions capacity as a centre of excellence in sustainability promoting environment-oriented business development and learning.

Key elements of a carbon price

A carbon price provides incentives to reduce emissions where they are cheapest, breaking the link between economic growth and growth in pollution. Treasury modelling demonstrates that the cost to Australia of cutting pollution and transforming our economy to cleaner energy sources is very modest. The Australian economy continues to grow, jobs continue to grow and average incomes continue to grow under carbon pricing. A carbon price is not a tax on households - around 500 of the biggest polluters in Australia will be required to pay for their pollution under the carbon pricing mechanism. The carbon price will commence on 1 July 2012, with a fixed price for the first three years. The price will start at $23 per tonne and will rise at 2.5 per cent per annum in real terms. From 1 July 2015 onwards, the carbon price will be set by the market. This will be the flexible price stage.

Treatment of transport fuels

As people in rural and regional areas are often reliant on their cars, the Governments decision to not cover transport fuel under the carbon pricing mechanism will help to minimise the impact on regional Australia. Households and businesses already pay fuel excise on fuel for their passenger and light commercial vehicles, and will not face a further carbon price. However, unlike households, some businesses get fuel tax credits which mean their excise is reduced, in many cases to zero. The Government will therefore reduce fuel tax credits for some businesses, so that they face an effective carbon price. Businesses in the agricultural, forestry and fishery industries will be exempt from these fuel tax credit reductions and will therefore not face an effective carbon price on their off road fuel use.

12. Supporting jobs and industry

Jobs will be supported by extensive assistance to businesses affected by a carbon price. The Government will allocate around 40 per cent of carbon price revenue to help businesses and support jobs. A Jobs and Competitiveness Program will provide $9.2 billion of assistance over the first three years of the carbon pricing mechanism to safeguard jobs in industries which face international competition and produce a lot of pollution. Manufacturing industry will be assisted by tailored programs worth $500 million for steel manufacturers, food processors and metal foundries and forgers. An $800 million grants program will help manufacturers invest in low pollution technologies. A Coal Sector Jobs Package will provide $1.3 billion in assistance to support coal mining jobs. These programs will support jobs and keep Australian industry strong while creating incentives to invest in clean energy and energy efficiency. This will ensure the Australian economy remains competitive in a world which is moving to reduce carbon pollution.

Why Australia needs to put a price on carbon pollution

Australia faces significant environmental and economic costs in a warmer, more unstable climate. Early global action is cheaper than later action, and in a world moving to tackle climate change economies that defer action face higher long-term costs. A number of studies in Australia and around the world have demonstrated that with existing technologies pollution can be reduced without slowing economic growth. Retooling our economy for a clean energy future will deliver new technologies, new jobs and new opportunities.

Jobs and Competitiveness Program

The Government recognises the importance of manufacturing and heavy industries which compete in international markets and use large amounts of energy or generate significant levels of carbon pollution. The goods these industries produce will remain essential in a clean energy economy. We need steel for our buildings and rail transport. Cement slabs can make houses more energy efficient as can glass used for double glazing. The Jobs and Competitiveness Program has been designed to provide assistance to the most emissionsintensive activities in the economy that are highly exposed to international competition either on export markets or from importers. There will be two categories of assistance. The most emissions-intensive and trade-exposed activities will initially be eligible for 94.5 per cent shielding from the carbon price. A second category of assistance will provide an initial shielding level of 66 per cent of the carbon price. While the assistance will shield some industries from the full impact of the carbon price, it will be structured to ensure that it still rewards those businesses that reduce their pollution in the future. Further details on eligibility for assistance under the Jobs and Competitiveness Program will become available in the future.

Keeping Australian manufacturing strong

Some manufacturing businesses which are less emissions-intensive will be provided with other transitional support during the move to a carbon price. This support will assist manufacturing businesses to improve their energy efficiency and reduce their exposure to changing electricity prices.

Clean Technology Investment Program

The $800 million Clean Technology Investment Program will provide grants to manufacturers to support investments in energy efficient capital equipment and low-pollution technologies, processes and products. These grants will provide practical assistance to manufacturing businesses, while supporting the incentives created by the carbon price to improve energy efficiency or use of energy from cleaner sources. Manufacturing businesses with facilities that use more than 300 megawatt hours of electricity or five terajoules of natural gas a year, or are covered by the carbon pricing mechanism, will be eligible to apply for grants under this program. Funding will be provided on a co-investment basis, with industry contributing on average three dollars for every dollar from the Government. This investment will help modernise parts of the Australian manufacturing sector and help manufacturers compete in a low-pollution world, with benefits for the job security of manufacturing workers.

Clean Technology Food and Foundries Investment Program

Special assistance will be provided to the food processing, metal forging and foundry industries. These industries are trade-exposed and have somewhat higher exposure to energy costs than general manufacturing businesses. Through the Food and Foundries Investment Program, the Government will provide grants worth up to $150 million over six years to the food processing industry and up to $50 million over six years to the metal forging and foundry industries. These grants will assist the industries to invest in energy efficient equipment and low-pollution technologies, processes and products.

All businesses in the food processing, metal forging and foundry industries will be able to apply for funding under this program. These industries are important to specific rural and regional areas and the Government wants to see these industries prosper while the world moves to a clean energy future. Funding will be provided on a co-investment basis, with industry contributing on average three dollars for every dollar from the Government.

Steel industry assistance*

Australian steel makers face pressures from factors other than a carbon price, including higher exchange rates, increases in raw material costs and lower growth rates in the Australian construction industry. The Government will provide assistance worth $300 million over four years to encourage investment and innovation in the Australian steel manufacturing industry through the Steel Transformation Plan. This will help the sector transform into an increasingly efficient and economically sustainable industry in a low-pollution economy.

Support for coal mines: Coal Sector Jobs Package*

The $1.3 billion Coal Sector Jobs Package will provide transitional assistance to help the coal industry to implement carbon abatement technologies for the mines that produce the most carbon pollution. The amount of carbon pollution produced by coal mines varies greatly, so the fairest way to deliver assistance is to target assistance at those mines that are most impacted by the introduction of the carbon price.

Coal Mining Abatement Technology Support Package*

The $70 million Coal Mining Abatement Technology Support Package will provide support for the development and deployment of technologies to reduce fugitive emissions from coal mines. It will provide support for the research, development and deployment of abatement technologies in the coal sector. There will be an emphasis on assisting small to medium miners to reduce their emissions by implementing new abatement technologies, equipment and processes. Funding will be provided via matched grants for the research and demonstration of new technologies, and grants on a two to one basis to assist smaller coal mines in developing abatement plans and technologies.

Support for small business

The Government recognises the contribution of the small business sector to the Australian economy. Small businesses will not be directly liable for the carbon price. However the Government will introduce measures to assist small firms with the transition to a clean energy future. This assistance will include increasing the small business instant asset write-off threshold to $6,500 to free up cash flow and help small business owners invest in new assets, including those that improve energy efficiency. More details of support for small business can be found in a separate fact sheet.

Adapting to climate change at low cost

The Government has a range of measures in place to help Australias manufacturing and resource-rich regions adapt to a clean energy future and become leaders in sustainable resource use. Affected regions have the opportunity to lead in the research, training and implementation of technologies and practices that will enable the more sustainable use of resources such as coal and water. Innovation and development of clean technologies in the manufacturing and resource sectors will help regional universities grow and bring more opportunities for service sector expansion and professional occupations.

The Government is boosting clean and renewable energy through the new $10 billion Clean Energy Finance Corporation. The Clean Energy Finance Corporation will assist businesses seeking funds to get innovative clean energy proposals and technologies off the ground and commercialise clean energy projects. A great deal of this investment is expected to flow through to regional and rural Australia. The sustainable use of Australias resources is highly important for each regions economic resilience.

Examples of opportunities in the Gippsland region

The Regional Development Australia Committee for Gippsland is working with key stakeholders to harness opportunities and address major challenges to improving liveability, productivity and sustainability. Priorities for the region include planning for a low carbon economy and exploring options for establishing a Centre for Sustainable Technologies at Monash Universitys Gippsland Campus. Planning for climate change is also being assisted by ClimateWorks Australia, who are developing a Low Carbon Growth Plan for Gippsland to identify low-cost carbon pollution savings, as well as the University of Melbourne and Victorian Department of Primary Industry, who are providing information and solutions to assist the Latrobe Valley adapt to climate change.

Key elements of a carbon price

A carbon price provides incentives to reduce emissions where they are cheapest, breaking the link between economic growth and growth in pollution. Treasury modelling demonstrates that the cost to Australia of cutting pollution and transforming our economy to cleaner energy sources is very modest. The Australian economy continues to grow, jobs continue to grow and average incomes continue to grow under carbon pricing. A carbon price is not a tax on households - around 500 of the biggest polluters in Australia will be required to pay for their pollution under the carbon pricing mechanism. The carbon price will commence on 1 July 2012, with a fixed price for the first three years. The price will start at $23 per tonne and will rise at 2.5 per cent per annum in real terms. From 1 July 2015 onwards, the carbon price will be set by the market. This will be the flexible price stage.

* This is a Government measure additional to those agreed by the Multi-Party Climate Change Committee

13. Small business

Small businesses will not be required to pay a carbon price. Small businesses will not have to count or monitor their carbon pollution or electricity use. They will not have to fill in a single form as part of the carbon price reform. The impact of a carbon price on small business will vary and most small businesses will not be significantly affected. In recognition of the important contribution of small business to economic activity, $240 million over the period to 2014-15 will go towards helping small businesses save energy and get advice to help to grow their business sustainably.

The impact of a carbon price on small business

A carbon price will create new job opportunities across a range of industries. For example, over time, renewable energy will grow from 10 to 40 per cent of the generation mix by 2050. This kind of growth will create spin-off opportunities for a whole range of small entrepreneurs and business owners. There may be some indirect cost impacts on small businesses, such as higher electricity bills, as a result of bigger companies passing on the costs of the carbon price. But these costs are projected to be modest. Prices of some consumer goods and services will rise, but the Governments household assistance package will ensure millions of households will be better off compared to their average price impact, so customers will still be able to support small businesses.

Measures to assist small business adjust to a carbon price

The Government recognises the contribution of small business to Australias economy. Small businesses comprise about 96 per cent of all businesses and represent about 35 per cent of industry value added and provide 47 per cent of the nations jobs. Small business operators often cant spare the time or dont have the financial resources to focus on matters outside their core business. That is why the Government will help small businesses get the support they need to stay competitive under a carbon price and share the benefits of Australias clean energy future.

Increasing the business asset write-off

For businesses with an aggregated turnover of less than $2 million a year, the small business instant asset write-off threshold will be increased from $5,000 to $6,500 for depreciable assets from the 2012-13 income year.

The existing instant asset write-off improves business cash flow by providing an immediate income tax deduction for the cost of eligible assets. Increasing the amount businesses can write off immediately to $6,500 will increase cash flow and assist small business to grow and invest in new equipment.

Support for small business: information assistance grants

The Government will establish a $40 million Energy Efficiency Information Grants program to provide information to small to medium businesses and community organisations on practical measures they can take to reduce their energy costs. Being able to get clear information from trusted sources is vital to small business. So this program will be delivered through grants to industry associations and non-government organisations which have established relationships with small businesses.

Clean technology advice for small businesses

The Government will inject an extra $5 million over four years to improve delivery of clean technology advice and other non-grant business support programs to small and medium businesses. These include the Industry Capability Network, Supplier Advocates and Enterprise Connect.

Recognising carbon neutral businesses Low Carbon Australia

Low Carbon Australia works with businesses to help them become carbon neutral. Taking part in Low Carbon Australias carbon neutral program can provide benefits such as: market opportunities including by positioning products as carbon neutral; business advantages including independent third party recognition of climate change and carbon management activities a company has undertaken; and reducing costs by reducing resource use.

AusIndustry support
AusIndustry provides a range of incentives to assist businesses grow. The Australian Government allocated $240 million over four years to establish Clean Business Australia a partnership with Australian business and industry for tackling climate change. The Climate Ready and Re-tooling for Climate Change programs assisted small to medium businesses to develop new technologies and services to respond to climate change and reduce their environmental footprint. Other AusIndustry support has been provided to assist small businesses: grow their online presence; commercialise emerging technologies; and access advice after the recent natural disasters.

Small Business Support Line

The Government operates a highly successful Small Business Support Line to provide small business owners with a single point of contact for access to information and referral services to improve their business sustainability and better manage their business. Support Line advisers link into the network of Business Enterprise Centres and other small business advisory services around Australia.

Telephone: 1800 77 7275 Monday-Friday I 8am-8pm AEDST Email: SBSL@innovation.gov.au

Business.gov.au
Information and advice is also available online at www.business.gov.au. The website, which includes a grants finder is a free service and provides information, tools and resources from the Australian and State and Territory Governments to assist in planning for, starting and running a small business.

Key elements of a carbon price

A carbon price provides incentives to reduce emissions where they are cheapest, breaking the link between economic growth and growth in pollution. Treasury modelling demonstrates that the cost to Australia of cutting pollution and transforming our economy to cleaner energy sources is very modest. The Australian economy continues to grow, jobs continue to grow and average incomes continue to grow under carbon pricing. A carbon price is not a tax on households - around 500 of the biggest polluters in Australia will be required to pay for their pollution under the carbon pricing mechanism. Small businesses will not have to pay a carbon price or be involved in any compliance activities like filling out forms. The carbon price will commence on 1 July 2012, with a fixed price for the first three years. The price will start at $23 per tonne and will rise at 2.5 per cent per annum in real terms. From 1 July 2015 onwards, the carbon price will be set by the market. This will be the flexible price stage.

14. Local government

Local governments are actively building resilience to climate change through effective planning. The expanded Low Carbon Communities program will help local governments reduce their energy costs through energy efficiency upgrades in community-use buildings and facilities. Communities will share in $10 billion of new investment for clean energy through the Governments new Clean Energy Finance Corporation. The Carbon Farming Initiative will provide opportunities for local governments operating landfills who are able to lower pollution from the existing waste stored in these sites.

Australias clean energy future

Without action to reduce carbon pollution, the world will face serious effects from climate change. A carbon price is the cheapest and most effective way to cut carbon pollution and is one part of the Governments comprehensive plan. The Governments plan for a clean energy future involves: introducing a carbon price; promoting innovation and investment in renewable energy; encouraging energy efficiency; and creating opportunities in the land sector to cut pollution.

Boosting investment in clean energy

Clean and renewable energy will receive a major boost through the Governments new $10 billion Clean Energy Finance Corporation. The Clean Energy Finance Corporation will assist businesses seeking funds to get innovative clean energy proposals and technologies off the ground and commercialise clean energy projects. A great deal of this investment is expected to flow through to regional and rural Australia and create new employment opportunities across Australia.

Expansion of the Low Carbon Communities program

The Governments Low Carbon Communities program will be significantly expanded to promote energy efficiency at a local level and among low-income households. Funding for the program will be increased from $80 million to $330 million. The Low Carbon Communities program will demonstrate how whole communities can reduce their energy use. Local councils and community organisations will be able to apply for grants to undertake energy efficiency upgrades and retrofits to council and community-use buildings, facilities and lighting. Community facilities that may benefit from this program include stadiums, education facilities, town halls and nursing homes. Low Carbon Communities will also be expanded to include two new initiatives aimed at improving the energy efficiency of low income households. A Low Income Energy Efficiency Program will provide grants to pilot approaches that assist low income households to reduce their energy costs. The Household Energy and Financial Sustainability Scheme will support low income households to improve their energy and financial sustainability.

Improving the energy efficiency of our buildings and equipment

Governments and industry have been working together to improve the energy efficiency of Australias homes and offices, and appliances and equipment. Minimum energy efficiency standards apply to all classes of residential and commercial buildings in Australia through the National Construction Code (formerly the Building Code of Australia). The energy efficiency of Australias existing commercial buildings is being further improved by the communication of up-to-date energy efficiency ratings through the Commercial Building Disclosure program and through tax benefits for energy efficiency improvements in existing buildings through the Tax Breaks for Green Buildings Program. Appliance and equipment energy efficiency is being improved through a program of minimum energy performance standards and energy labelling to limit the sale of inefficient products and provide information on equipment energy use. Inefficient lighting and hot water systems are being phased out and over 212,000 households have already upgraded to cleaner hot water systems and received an Australian Government rebate.

Building knowledge and sharing information

Responding to climate change is becoming embedded into local government strategic and corporate plans. Many local governments have undertaken climate change risk assessments and/or adaptation plans to safeguard their communities and community assets. Through the Governments Local Adaptation Pathways Program, over 90 local governments received assistance to undertake risk assessments and develop adaptation strategies for the impacts of climate change.

Local Governments working together

Climate change is a major focus of the Australian Centre of Excellence for Local Government (ACELG), a collaboration of universities and professional bodies committed to the advancement of local government. ACELG has published a working paper on Australian Local Government and Climate Change and convened the Local Government Climate Change Roundtable. The Roundtable acknowledged that action by local government on climate change will support actions to secure the productivity, sustainability and viability of local communities into the future.

The Roundtable plans to do further work to identify and disseminate new thinking and initiatives on climate change by local government.

Household information and advice on saving energy

The Governments LivingGreener website (www.livinggreener.gov.au) provides information on how households can improve their energy efficiency to save money. The LivingGreener website will be expanded to connect all Commonwealth, state and territory energy efficiency and climate change programs. Tailored advice to householders will be delivered through a household telephone advice line and social media channels.

Protecting Australias natural resources

The Government is committed to protecting Australias natural resources from climate change impacts so they can be enjoyed by future generations. The existing $93 million Climate Change Adaptation Program includes: $50 million to establish the National Climate Change Adaptation Research Facility and fund research that will give decision-makers the information they need to adapt to the impacts of climate change; $25 million in the Caring for our Coasts policy on coastal adaptation, including high priority work on sea level rise mapping to help coastal communities understand the climate change risk and exposure of coastal infrastructure; $5 million to help improve management of climate change impacts in natural ecosystems or regions of Australia that are particularly vulnerable; and a range of activity to better understand the nature and cost impacts on major infrastructure.

Carbon credits
The Governments Carbon Farming Initiative will provide an important revenue stream for lowering emissions of greenhouse gases from legacy waste stored in landfills. The Carbon Farming Initiative will create credits from saving or storing carbon pollution in the landscape, agricultural industries and the so-called legacy waste stored in landfills often operated by local government. It will be complemented by a range of programs to enhance regional natural resource planning and better identify the regional impacts of climate change, develop new methods of storing or reducing carbon in the landscape and provide extension and outreach on land sector issues.

Water for the Future

Water for the Future is the Australian Government's long-term initiative to better balance the water needs of communities, farmers and the environment. One of the four key priorities of the initiative is taking action on climate change. The Water for the Future initiative includes the National Water Security Plan for Cities and Towns program, which supports communities with fewer than 50,000 people by funding practical projects that save water and reduce water loss.

Key elements of a carbon price

A carbon price provides incentives to reduce emissions where they are cheapest, breaking the link between economic growth and growth in pollution.

Treasury modelling demonstrates that the cost to Australia of cutting pollution and transforming our economy to cleaner energy sources is very modest. The Australian economy continues to grow, jobs continue to grow and average incomes continue to grow under carbon pricing. A carbon price is not a tax on households - around 500 of the biggest polluters in Australia will be required to pay for their pollution under the carbon pricing mechanism. The carbon price will commence on 1 July 2012, with a fixed price for the first three years. The price will start at $23 per tonne and will rise at 2.5 per cent per annum in real terms. From 1 July 2015 onwards, the carbon price will be set by the market. This will be the flexible price stage.

15. Biodiversity Fund

Australia has unique native ecosystems which are highly diverse and capable of storing significant amounts of carbon. Biodiversity plays a crucial role in maintaining the productive capacity of our landscape. Restoring native vegetation and soil carbon can help combat climate change while also protecting our biodiversity. The Governments new ongoing Biodiversity Fund of $946 million over its first six years will support landholders to undertake projects that establish, restore, protect or manage biodiverse carbon stores. The Biodiversity Fund will improve the resilience of Australias unique species to the impacts of climate change, enhance the environmental outcomes of carbon farming projects, and help landholders protect carbon and biodiversity values on their land.

Establishing new native vegetation and habitats

The Biodiversity Fund will support landholders to establish new native vegetation and restore habitats in targeted areas of the landscape. Landholders will be supported to establish new environmental plantings that create wildlife corridors and improve landscape connectivity. Wildlife corridors help species to move across the landscape and adapt to climate change in a way that is not possible if they are restricted to small fragments of remnant vegetation. The Biodiversity Fund will also support landholders to establish and restore vegetation along rivers and streams, and to establish new wetlands on private property. Wetlands and waterways are a critical part of our natural environment. In addition to storing carbon, they provide habitats for many species, reduce the impacts of floods, absorb pollutants and improve water quality.

Managing and enhancing existing native vegetation

The Biodiversity Fund will support landholders to maintain or enhance existing native vegetation for its carbon and biodiversity benefits. Supporting landholders to actively manage remnant native vegetation will help to ensure that the carbon and biodiversity values of existing vegetation do not diminish over time. Funding will be provided to landholders that take new action to protect remnant vegetation on private land, including land already under conservation covenants and land subject to land clearing restrictions. Funding will also be available to support conservation and management actions associated with the cessation of logging in publicly owned native forests.

Funding will be targeted towards the management and enhancement of existing native vegetation that has high conservation value, including wildlife corridors, vegetation along rivers and streams, and vegetation within wetlands on private property.

Controlling weeds, pests and feral animals

The Biodiversity Fund will support landholders to control weeds, pests and feral animals on their properties. One of the risks of creating a more connected landscape is that feral animals and weeds will be able to move more freely through the landscape. This can threaten agricultural resources and environmental values. To help manage this risk, the Biodiversity Fund will support landholders to manage invasive species in new and existing native vegetation. Funding will be allocated to areas where weeds, pest and feral animals are having a high, negative impact on biodiversity. Funding will also be targeted towards areas which are strategically important to preventing the spread of invasive species into new areas. The Biodiversity Fund will support projects utilising well established, proven control methods, as well as projects trialling new, innovative control methods.

Maximising conservation gains

The Biodiversity Fund will give priority to projects in particular land systems when significant conservation gains are possible. The Governments $44 million Regional Natural Resource Management Planning for Climate Change measure will help to identify which land systems will be targeted.

Accessing the Biodiversity Fund

The Government will issue guidelines for landholders, which will outline the criteria for accessing support from the Biodiversity Fund. These guidelines will be developed after consultation with stakeholders. The Biodiversity Fund will be managed by the Department of Sustainability, Environment, Water, Population and Communities. An independent Land Sector Carbon and Biodiversity Advisory Board will be established to provide advice to Government on the implementation of the Biodiversity Fund, including setting funding priorities and reviewing the success of the program.

16. Transport fuels

Households, on-road business use of light vehicles and the agriculture, forestry and fishery industries will not face a carbon price on the fuel they use for transport. Some businesses which effectively pay no fuel excise will face an effective carbon price, through changes to the current fuel tax regime. Heavy on-road vehicles will not face a carbon price from the commencement of the scheme. The Government intends to apply a carbon price on heavy on-road vehicles from 1 July 2014, but notes this measure was not agreed to by all members of the Multi-Party Climate Change Committee.

On-road use by households and light commercial vehicles

Households and on-road commercial vehicles 4.5 tonnes and under currently pay the full rate of excise. They will continue to pay excise under current arrangements but will not also pay a carbon price on top of this.

Off-road business use

Some businesses effectively pay no excise on the fuel they use off-road, as their excise is offset under the fuel tax credits scheme. An effective carbon price will be imposed on some businesses through reduced fuel tax credit entitlements and reductions to the automatic remission of excise on gaseous fuel used for non-transport purposes. The current fuel tax regime provides fuel tax credits that remove or reduce the incidence of fuel tax from business inputs so that fuel tax falls primarily on non-business consumers and light commercial vehicles. By reducing existing fuel tax credits by an amount equal to the carbon price, the Government will impose an effective carbon price on businesses liquid and gaseous fuel emissions through the existing fuel tax regime. Fuel tax credits will not be reduced for the agriculture, forestry and fishery industries. Therefore, these industries will not pay an effective carbon price. The fuel tax credits will remain at 100 per cent of the effective fuel tax for these industries. Calculating the fuel tax credit reductions As different fuels emit different amounts of carbon when they burn, the fuel tax credit changes for petrol and diesel will be determined according to their specific level of emissions. Fuel tax credit changes for liquid fossil fuels other than petrol and diesel will be based on the diesel emission rate. Fuel tax credits changes for gaseous

fuels (such as Liquefied Petroleum Gas (LPG), Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG)) will reflect the effective carbon price, based on their specific emission rates. Fuel tax credits for businesses will be reduced for fuels acquired after 1 Jul 2012 by the amount of the fixed carbon price as set at the beginning of each of the fixed price years from 2012-13 to 2014-15. When Australia moves to an emissions trading scheme in 2015-16, the fuel tax credit changes will be determined on a six-monthly basis, based on the average carbon price over the previous six-months. Table 1 lists the relevant fuel tax credit reductions per fuel type over the three year transitional assistance period. Figures are in cents per litre except for CNG and LNG which are in cents per kilogram. Table 1: Fuel tax credit reductions
Fuel 2012-13 2013-14 2014-15

Petrol Diesel and other liquid fuels LPG LNG & CNG

5.52 6.21 3.68 6.67

5.796 6.521 3.864 7.004

6.096 6.858 4.064 7.366

On-road business use: heavy vehicles

Heavy on-road vehicles (over 4.5 tonne gross vehicle mass) will not face a carbon price from the commencement of the scheme. The Government intends to apply a carbon price on heavy on-road vehicles from 1 July 2014, but notes this measure was not agreed to by all members of the Multi-Party Climate Change Committee. Gaseous fuels such as LPG, LNG and CNG used for on-road transport will not be subject to an effective carbon price as their eligibility for a fuel tax credit is reduced to zero due to the Road User Charge.

Non-transport use of gaseous fuels

Non-transport LPG and LNG receive a remission, and non-transport CNG receives an exemption from the excise and excise equivalent customs duty imposed on gaseous fuels so that effective tax only falls on gaseous fuels for transport use. To ensure consistent coverage of non-transport use of gaseous fuels, such as emissions from bottled LPG and reticulated gas, an effective carbon price will apply through a reduction in the automatic remission or exemption of excise. Under the Governments plan for a clean energy future, the fuel tax remission or exemption for the non-transport LPG, LNG and CNG will be adjusted on a cent-for-cent basis equivalent to the carbon content price on the fuels, had the gaseous fuels been subject to carbon pricing.

Aviation, marine and rail transport

As aviation fuels do not receive fuel tax credits, domestic aviation fuel excise will be increased by an amount equivalent to the carbon price on an annual basis over the fixed price period to provide an effective carbon price for aviation. From 1 July 2015, aviation excise will be increased on a six-monthly basis, based on the average carbon price over the previous six months. International aviation fuel use is not subject to fuel tax and will therefore not be subject to an effective carbon price.

Table 2 Carbon price impact on aviation fuel, cents per litre

2012-13 Carbon price ($/tonne CO2-e) Aviation kerosene Aviation gasoline 23.00 5.98 5.06 2013-14 24.15 6.279 5.313 2014-15 25.4 6.604 5.588

Note: impact based on emissions of the fuel only, does not include impact from other refining based emissions or energy costs.

The current rate of excise on aviation (both aviation kerosene and aviation gasoline) is 3.556 cents per litre. Over the period the excise rate for aviation kerosene would rise by 6.604 cents per litre to 10.16 cents per litre in 2014-15, and the excise rate for aviation gasoline would rise by 5.588 cents per litre to 9.144 cents per litre. The vast majority of fuel used in aviation is aviation kerosene. Marine and rail transport effectively pay no excise on the fuel they use, as their excise is offset under the fuel tax credits scheme. The Carbon Pricing Mechanism will impose an effective carbon price on those activities through reduced fuel tax credit entitlements in the same way that it applies to off-road business use.

Other fuels
Due to their zero-rating for carbon emissions, renewable fuels such as ethanol, biodiesel and renewable diesel will not be subject to a carbon price. Similarly, non-combustion fuels such as solvents and lubricants will not face a carbon price.

Supporting new fuel efficient vehicles

A new wave of vehicles are becoming available that are cleaner and cheaper to run. Under new standards being introduced from 2015, all car companies will be required to reduce emission levels from vehicles they sell by introducing better technologies and adjusting the range of models they sell in Australia. The Government is working with the automotive industry to set the emission levels that will apply under the new standards. In addition to helping make a reduction to Australias carbon pollution from transport, this initiative will deliver real cost savings for motorists through improved fuel efficiency in new vehicles. The Green Vehicle Guide and the Fuel Consumption Label are two other initiatives supporting Australians to make better informed decisions and help consumers choose vehicles that use less fuel and have lower emissions.

Cutting transport emissions

The Government is also working to cut pollution by improving our transport systems. Since late 2007, the Government has committed over $7.3 billion to modernise and extend urban passenger rail infrastructure to provide genuine alternatives to private car travel. The $60 million national smart managed motorways trial will help improve congestion, lower pollution, and expand the capacity of existing road infrastructure networks. Managed motorways use new technologies to create a more consistent level of motorway performance, resulting in lower greenhouse gas emissions. The Government will continue working with the aviation industry to reduce its emissions.

17. Tax Treatment

The income tax treatment of permits will be provided in specific provisions in the tax law to provide certainty to taxpayers as to their income tax treatment. Supplies of permits under the carbon price will be Goods and Services Tax (GST)-free. However, the normal GST rules will apply to transactions involving financial derivatives of permits and the payment of grants. The accounting treatment of permits and auditing of carbon pollution under the carbon price will continue to be determined in accordance with international standards, as adopted in Australia.

Income tax treatment of permits

The Government recognises the importance of providing certainty in the way the tax law treats permits under the carbon price, as increased certainty will reduce compliance and administration costs faced by taxpayers in their interaction with the tax law. Specific legislative provisions will set out the income tax treatment of permits, rather than taxpayers having to rely on the application of the general provisions of the existing tax law. The specific provisions in the tax law will provide a set of general rules that are intended to be robust across all types of permits that are able to be surrendered against a liability under the carbon price under both the fixed and flexible price periods. Broadly, the proceeds from selling a permit will be assessable in the income year the permit is sold. A deduction will be allowed for any expenditure incurred on the purchase of the permit. However, the deduction will effectively be deferred through the rolling balance method (similar to current trading stock rules in the tax law) until such time as the permit is surrendered or sold. Any assistance provided in the form of cash grants will be treated according to the existing tax law. Where assistance provided in the form of freely allocated permits is effectively a monetary transfer, then it will be treated in the same way as a cash grant and the market value of the permit will be included in the taxpayers assessable income in the income year it is received and a deduction allowed upon surrender or sale. Freely allocated permits provided under the Jobs and Competitiveness Program will be valued at zero provided the income year ends on or before the surrender date for the compliance year for which they were issued. This avoids a situation where an emission intensive trade exposed entity is required to pay tax on their permits before they have an opportunity to use them, therefore potentially affecting their production decisions.

GST treatment of permits

The Government is committed to minimising compliance costs for taxpayers by making permits under the carbon price GST-free. This treatment will involve a change to the GST base and will require the agreement of the States and Territories. GST-free treatment of supplies of permits will allow transactions of permits via an open exchange to operate without reference to GST rules and on a uniform market price. This approach is consistent with the recommendations of the Australias Future Tax System Review. Normal GST rules will continue to apply to transactions involving financial derivatives of permits and payments of grants. The application of the GST rules to financial derivatives of permits and the payment of grants do not give rise to the same compliance issues that arise in the application of the normal GST rules to permits.

Accounting and audit issues

The accounting treatment of permits and auditing of carbon pollution will be determined in accordance with international standards, as adopted in Australia, to ensure that the cost of capital is minimised.