The Government's plan for a clean energy future includes support to help households adjust to the introduction of the carbon price. The Household Assistance Package is a key part of the clean energy future plan. This package will rollout as early as this month (May 2012) before the carbon price is introduced. The Household Assistance Package provides financial assistance totalling $14.3 billion over four years from 2011‑2012, delivered through tax cuts and increased Government payments. Other parts of the plan provide incentives for households to adopt their own energy and cost saving measures. By adopting such measures, households will be able to save money as well as contribute to Australia's clean energy future.
Household assistance is targeted to ensure that low and middle income households receive assistance to help with the impact of the carbon price, especially those who have less financial room in their budgets. This recognises that lower income households spend a higher proportion of their incomes on essential household expenses such as electricity and gas.
The Government has committed to ensuring:
- more than 50 per cent of the carbon price revenue will be used to assist households;
- all assistance — payments and tax cuts — will be permanent;
- all low-income households will be eligible for assistance that at least offsets their expected average price impact from the carbon price;
- middle-income households will be eligible for assistance that helps them meet their expected average price impact; and
- people covered by a Commonwealth concession card who have high home energy costs because they rely on essential medical equipment in their home, or additional heating or cooling, to manage their disability or medical condition may be eligible for assistance.
The estimated impact on consumer prices of a $23 carbon price is 0.7 per cent in 2012‑13, or around $9.90 on average per week for households, which includes $3.30 per week on average electricity expenditure and $1.50 per week on average gas expenditure. Nine out of ten Australian households will benefit from assistance through tax cuts, increases in pensions, increased allowances and family payments or a combination of the above, worth an average of $10.10 per week per household.
The Household Assistance Package starts from May this year with an initial payment to families and parents, seniors and individuals who receive a government payment. This will be followed by tax cuts in July. Ongoing household assistance will become a regular part of government payments between March next year and early 2014.
Energy efficiency programs such as the Home Energy Saver Scheme (described in more detail in Chapter 6) aim to provide support to low income households across Australia that experience difficulty meeting and paying for their energy needs. This Scheme can assist low income households to manage their energy bills and improve their financial capability.
Additional funding is being provided to the Australian Competition and Consumer Commission (ACCC), to investigate and take action against any business that makes false or misleading representations about the impact of the carbon price on the prices they charge customers.
The ACCC issued guidance for consumers and business in March 2012, and continues to investigate misleading claims about the carbon price.
- The Household Assistance Package legislation, including the Clean Energy (Household Assistance Amendments) Act 2011, Clean Energy (Tax Laws Amendments) Act 2011, and the Clean Energy (Income Tax Rates Amendments) Act 2011, was passed on 8 November 2011.
- The Household Assistance Package will commence from 16 May 2012, with an initial payment to eligible families and parents, seniors and individuals who receive a government payment.
- The ACCC released guidance for consumers and business in March 2012, and continues to conduct investigations into complaints that relate to misleading claims about the impact of the carbon price.
- Millions of Australians will receive tax-cuts from 1 July 2012 as part of the Household Assistance Package, giving them more money in their pay packets.
Figure 2: Overview of household assistance
Assistance through increased Government payments
The Household Assistance Package will commence from 16 May 2012, with an initial payment, the Clean Energy Advance, to be paid automatically to millions of Australians — including families and parents, seniors and individuals who receive a government payment.
This initial payment provides assistance prior to the introduction of the carbon price on 1 July 2012. It is an adjustment to last until the extra assistance becomes a regular part of government payments. The initial payment under the Household Assistance Package ensures that families and parents, seniors and individuals can prepare for the start of the carbon price.
Pensioners will receive an initial payment of $250 for singles and $190 for each eligible member of a couple. This assistance will be paid to those on the Age Pension, Carer Payment, Disability Support Pension (except those under 21 with no dependent children) and self‑funded retirees holding a Commonwealth Seniors Health Card.
Jobseekers and other individuals in receipt of allowance payments, such as Newstart Allowance, will receive an initial payment of $160 for singles and $150 for each eligible member of a couple. Single parents receiving Parenting Payment Single will receive an initial payment of $210. Students and disability support pensioners aged under 21 with no dependent children will be eligible to receive two Clean Energy Advances, the first covering the 2012‑13 financial year, and the second covering the six months from 1 July 2013 to 31 December 2013.
Veterans on income support and compensation payments made under the Veterans' Entitlements Act 1986 (including disability pensions and the war widow/ers pension) and the Military Rehabilitation and Compensation Act 2004 (including permanent impairment payments, wholly dependent partner payments and Special Rate Disability Pension) will also receive an initial payment under the Household Assistance Package.
Households that wish to use this assistance to adjust their spending or invest in energy efficiency may be able to save money from ongoing household budgets and at the same time reduce carbon pollution.
Between March next year and early 2014, the extra assistance under the Household Assistance Package will become a regular part of government payments through the Clean Energy Supplement. The Clean Energy Supplement will be equivalent to a 1.7 per cent increase in the relevant annual maximum payment rate for families and parents, seniors, veterans and other individuals who receive government payments.
The 1.7 per cent increase to government payments comprises an increase of 0.7 per cent from the extra indexation flowing from the higher Consumer Price Index due to the introduction of a $23 carbon price, and a further 1.0 per cent increase in payments to provide additional assistance. To prevent the double payment of indexation, there will be an adjustment to indexation for pensions and most allowances in March 2013, for Family Tax Benefit in July 2013 and for Youth Allowance, Austudy and ABSTUDY in January 2014.
Single Income Family Supplement
As part of the Household Assistance Package, up to $300 in Single Income Family Supplement will be available per year for single income families where the primary income earner has a taxable income between $68,000 and $150,000. This payment recognises that single income families receive less assistance through tax cuts compared with dual income families on similar incomes. This payment will be available from 1 July 2013.
Low Income Supplement
The Low Income Supplement of $300 will be available to people in low-income households who can show they did not receive enough assistance through tax cuts or other household assistance payments. People may be eligible for the supplement if they have annual adjusted taxable income of less than $30,000 for singles, $45,000 for couples and $60,000 for people with dependent children. To be eligible people must be able to show that in 2011‑12 they were either not required to pay tax of were required to pay tax of less than $300 and that for most of the year they did not receive another government payment. People can apply for the payment from 1 July 2012.
Essential Medical Equipment Payment
The Government will provide $52.5 million over three years from 2012‑13 for the Essential Medical Equipment Payment program. This is an annual support for Australians with higher than average energy costs because they rely on essential medical equipment at home. Eligible recipients include people coping with serious medical conditions at home, and their carers
The Essential Medical Equipment Payment will be an annual, tax‑exempt payment of $140 to people with medical needs, or their carers who:
- are covered by a Commonwealth Government concession card; or a Department of Veterans' Affairs Gold or White Card; and
- use certain essential medical equipment, or have certain medical conditions that require the use of additional heating and/or cooling in their home; and
- are responsible, either wholly or partly, for the cost of running the equipment.
People can apply for the Essential Medical Equipment Payment from 18 June 2012, with payments starting from 1 July 2012.
Supporting Aged Care Residents and Providers
Pensioners and Commonwealth Seniors Health Card holders in residential aged care will receive financial assistance through the new Clean Energy Advance and Clean Energy Supplement, delivered as part of the Household Assistance Package. About half of this assistance will flow through to aged care providers through an increase in the basic daily fee. This fee, payable by a resident of an aged care facility, will increase from 84 per cent to 85 per cent of the total basic Age Pension amount.
The increase in the basic daily fee recognises that aged care providers bear many of the costs of living 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.
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 1 July 2012 will not be disadvantaged due to the introduction of a carbon price. A new Government aged care supplement will be payable in respect of these residents. This will ensure aged care providers receive an equivalent increase in funding for these residents as they do for pensioners and Commonwealth Seniors Health Card holders.
These new arrangements will start from 1 July 2012.
Assistance through tax reform
The household assistance package reforms the structure of the personal tax system, in line with key recommendations of the 2009 Australia's Future Tax System Review. These reforms modernise the personal income tax system, making it simpler and more transparent by reducing reliance on a structural tax offset to deliver tax relief to low‑income individuals. In addition, the reforms deliver targeted tax cuts that will improve the immediate rewards from work, building on other recent Government measures to lift workforce participation. This represents a further response by the Government to the Australia's Future Tax System Review's overarching goals for reforming Australia's tax and transfer system to meet the challenges of the 21st century.
The Government is investing $8 billion over three years from 2012‑13 in the tax reform package comprising:
- An increase in the statutory tax‑free threshold from $6,000 to $18,200 from 1 July 2012, and to $19,400 from 1 July 2015 (on transition to a floating carbon price) and related adjustments to the low income tax offset (LITO) and statutory marginal tax rates; and
- Adjustments to a number of personal income tax offsets and concessions, and increased Medicare levy exemption thresholds, to ensure that nobody pays more tax as a result of changes to the statutory rates and thresholds.
The combined effect of the LITO plus the $18,200 tax-free threshold from 1 July 2012 means that people will be able to earn annual income of up to $20,542 before they pay any tax. From 1 July 2015, the further increase in the statutory tax-free threshold to $19,400 together with a reduced LITO of $300, means that people with annual incomes of up to $20,979 will pay no tax.
By delivering these tax cuts through raising the tax-free threshold, by 1 July 2016, over one million Australians earning less than the new tax-free thresholds will no longer need to lodge an income tax return. They will be able to keep all of their wages in their regular pay packets, instead of waiting to receive some of it at the end of the financial year, as happens now. This will help workers make ends meet, while further improving immediate rewards from work.
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. The second round of tax cuts from 1 July 2015 will increase this annual saving to at least $380 for most taxpayers earning below $80,000 a year.
As part of the changes, the statutory marginal tax rates will be more closely aligned with the effective rates that individuals actually pay, increasing transparency in the tax system.
Ensuring consumers are not misled about the impact of the carbon price
The Government is providing $12.8 million over four years from 2011‑12 to protect Australian consumers. The Australian Competition and Consumer Commission (ACCC) investigates businesses that make false or misleading claims about the impact of a carbon price, which contravenes the Australian Consumer Law. The ACCC released guidance for businesses and consumers in March 2012 to raise awareness of their obligations and rights, respectively, under the Australian Consumer Law.
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