8 November 2011 – The Federal Government today delivered a mammoth broadside of information on promises and plans for the introduction of the carbon price, to match the size of the reforms now under way.
Following are the highlights:
Australia will see the biggest expansion in renewable energy in its history under the Gillard Government’s policies for tackling climate change by moving to a clean energy future.
This investment will not only reduce Australia’s greenhouse gas emissions but it will also create jobs and support projects and skills to help us position ourselves in a low-carbon global economy.
Key policies are:
- The expanded Renewable Energy Target. This will ensure that the equivalent of 20 per cent of Australia’s electricity comes from renewable sources by 2020. The RET is already driving a significant expansion in renewable energy.
- Introducing a carbon price from 1 July 2012. This will create powerful economic incentives for further growth in renewable energy. Putting a price on carbon pollution will increase demand for alternative energy sources. It will give businesses a financial incentive to reduce emissions in producing and consuming energy. Carbon pricing will also spur investors, innovators and entrepreneurs to develop and bring new renewable energy technologies to the marketplace.
- Creating a new statutory body, the Australian Renewable Energy Agency. ARENA will administer $3.2 billion in Government support for research and development, demonstration and commercialisation of renewable energy technologies. It will provide independent, efficient and streamlined administration of funding for projects that strengthen renewable energy and enabling technologies.
- Establishing a new commercially-oriented Clean Energy Finance Corporation. The CEFC will have $10 billion in funds available to invest in businesses seeking to get innovative clean energy proposals and technologies off the ground. It will encourage private sector investment and help overcome capital market barriers to commercialising clean energy technologies. The Government has appointed the Reserve Bank board member and experienced businesswoman, Jillian Broadbent AO, to chair an expert review to report on an investment mandate, risk management approach and governance arrangements for the CEFC. Legislation to establish the CEFC will be introduced into Parliament next year.
Under the Government’s reforms around $100 billion is expected to be invested through to 2050 in the renewable and clean energy sources of the future.
Treasury modelling shows that by 2050 the renewable energy sector (excluding hydro) will be 18 times larger than it is today as a result of the Government’s Clean Energy Future plan.
Jobs and small business
A $9.2 billion Jobs and Competitiveness Program which will assist industries like aluminium, steel, cement, lead and zinc, glass making, LNG and paper manufacturing.
The Senate is also due to consider legislation this week for the Government’s Steel Transformation Plan which will deliver extra assistance to steel makers facing pressures from a high Australian dollar, high commodity prices and weak growth in construction.
The Steel Transformation Plan will provide $300 million over five years to support investments which will allow the sector to transform into a more efficient and sustainable industry.
In addition, the Government’s $1.2 billion Clean Technology Program will assist manufacturers which do not meet “emissions intensity, trade exposed” assistance thresholds.
The Clean Technology Program comprises:
- $800 million under the Clean Technology Investment Program for grants supporting investments in energy-efficient equipment and low-pollution technologies, processes and products.
- $200 million under the Clean Technology Food and Foundries Investment Program for energy efficiency improvements by food processors, metal forgers and foundries.
- $200 million under the Clean Technology Innovation Program for business R&D spending in renewable energy, low-pollution technology and energy efficiency.
That is why the Clean Energy Future package will extend the instant asset write-off threshold from $5000 to $6500 per item for small businesses with turnover less than $2 million a year, from 2012-13.
This will further improve cash flow for small business operators, helping them to grow and invest in new equipment, by providing an even larger immediate income tax deduction for the cost of eligible assets.
The carbon pricing mechanism will not apply to small business. Small businesses will not have to count or monitor their carbon pollution or electricity use. They will not have to fill out any extra forms as part of the carbon price mechanism.
A $40 million Energy Efficiency Information Grants program will support small to medium businesses with practical measures to reduce their energy costs.
The Gillard Government will also inject a further $5 million over four years to provide clean technology advice and other non-grant business support programs to small and medium
Around half of Australia’s two million small businesses are micro-businesses, the majority of these tradies and owner-operators running family businesses. These small business owners will benefit from the same tax cuts as householders, especially the trebling of the tax-free threshold from $6000 to $18,200 from July next year
Rural and regional Australia
The Government has opened the way for farmers and other land managers to earn new streams of income through the Carbon Farming Initiative and contribute to the transition to a low carbon future.
Credits generated under the Carbon Farming Initiative – also recognised for Australia’s international obligations under the Kyoto Protocol – will be able to be sold to companies liable under the carbon pricing mechanism.
This will include credits earned from activities such as reducing emissions from livestock and fertiliser, reforestation and savanna fire management. The Government has also allocated $250 million to provide incentives for other activities, including revegetation and soil carbon projects, through the purchase of non-Kyoto compliant Carbon Farming Initiative credits.
In total, around $1.7 billion will be invested in land sector measures over the next six years to support the Carbon Farming Initiative, maximise the benefits of storing carbon in our landscape, and reduce emissions.
This funding will target emerging technologies and innovative management practices including biochar, biofuels and new crop and grazing species.
It will also assist agricultural industries and others to test new ways of measuring, modelling and reporting on carbon emissions.
The Clean Energy legislation excludes the agricultural sector from the carbon pricing mechanism.
Farmers, forestry operators and other land managers will not pay a carbon price for the emissions from their activities and importantly, they will not face a carbon price for their off-road fuel use or on-road fuel use for light vehicles.
These sectors will however have the opportunity to benefit from economic rewards under the Carbon Farming Initiative.
The Government will provide significant assistance to the food processing industry to help it adjust to the introduction of a carbon price. Grants will be sourced from a pool of $150 million, provided under the Gillard Government’s $200 million Food and Foundries Investment Program.
Under the Clean Energy Future legislation passed today, a 15 per cent refundable tax offset will also become available for conservation tillage equipment for three years. This will improve soil carbon, water retention and productivity.
The legislation passed by the Senate today includes a generous assistance package to help households with modest price impacts from the introduction of a carbon price from 1 July 2012.
More than half the revenue from the carbon price will be used to assist households.
Increases in family payments, pensions and allowances will start with lump sum advance payments of a new Clean Energy Supplement in May and June next year.
Tax reforms being delivered as part of the package will see the tax-free threshold rise from $6000 to $18,200 from 1 July 2012, and then to $19,400 from 1 July 2015. This will mean over a million people will no longer need to lodge a tax return.
Treasury has forecast that the carbon price will have a modest impact on the cost of living, increasing the Consumer Price Index by 0.7 per cent. On average, households will see cost increases of $9.90 a week while the average assistance will be $10.10 a week.
Under the Government’s assistance package:
- Nine out of every ten households will receive assistance.
- Almost six million households will receive assistance that meets or exceeds their expected average price impact.
- Over four million households will get assistance that provides at least a 20 per cent buffer over and above their expected average price impact.
As a Labor Government, we are targeting this assistance at those who need it most – low and middle income workers, families, pensioners and other people in need. The assistance is permanent and it will rise in the future.
The extra payments for those on pensions, benefits and allowances are indexed to future consumer price increases and there will be a second round of tax cuts in 2015 to cover the projected impact of the carbon price to the end of the decade.
Details of the assistance measures are as follows.
From 1 July 2012, every taxpayer earning up to $80,000 a year will receive a tax cut, with most getting at least $300 annually. A second round of tax cuts will apply from 1 July 2015, increasing this annual saving for most taxpayers earning below $80,000 a year to at least $380.
The tax?free threshold will be more than trebled, increasing from $6,000 to $18,200 from 1 July 2012, and to $19,400 from 1 July 2015.
Regular wage earners with incomes below the new tax-free threshold will not have any tax withheld from their wages by employers, which will mean higher take-home pay and better incentives to work.
The changes will particularly benefit part?time workers and workers on low incomes, ensuring that they pay less tax.
Increases to family payments, pensions and allowances
A new Clean Energy Supplement will be paid, equal to a 1.7 per cent increase in pensions, allowances and family payments.
The assistance will mean:
- Up to $338 extra per year for single pensioners and self-funded retirees, and up to $510 per year for pensioner couples combined.
- Up to $110 per child for a family that receives Family Tax Benefit Part A.
- Up to $69 extra for families that receive Family Tax Benefit Part B.
- Up to $218 extra per year for single income support recipients and $390 per year for couples combined for people on allowances.
- Up to $234 per year for single parents in addition to the increased family payments they receive.
Households will receive these extra payments initially in the form of a lump sum advance payment in May-June 2012 to ensure Australians have extra money in their pockets to help adjust to the carbon price.
For pensioners and most allowees, this advance payment will be equivalent to nine months – or in other words, about three quarters – of the extra annual payment.
For families, this advance payment will be equivalent to a full year of the extra payment.
Payments of the Clean Energy Supplement will be paid on a fortnightly basis from March 2013 for pensions and most allowances, July 2013 for family payments and January 2014 for students on Youth Allowance.
Some low-income households – such as retirees under pension age who are not paying any tax on their superannuation income – 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 claim the new $300 annual Low Income Supplement to ensure they receive assistance as they adjust to changes in their costs of living after the carbon price is introduced.
A special Single Income Family Supplement of up to $300 per year will assist eligible single income families recognising that, unlike dual income families, these single income families only get one tax cut.