Millions of Australian households will receive tax cuts, higher family payments or increases in pensions, benefits and allowances following passage of the Gillard Government's Clean Energy legislation by Parliament.
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 $6,000 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.
Tax cuts
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.